April 25, 2011 (Chinavestor) There aren't too many China stocks extremes on Monday, according to the overbought monitor. China Unicom (NYSE:CHU) is trading closest to extreme highs and is likely to take a breather before continuing the rally. Small cap stocks like China Transinfo Techn. (NASDAQ:CTFO) and GigeMaedia Inc. (NASDAQ:GIGM) stand out on the overbought chart but are less interesting for trading purposes due to their relatively low volume. Ctrip.com Inc. (NASDAQ:CTRP) and Melco Crown Entertainment (NASDAQ:MPEL) are stocks of interest for day-traders. Stock extremes on the oversold end include Synutra International (NASDAQ:SYUT), Suntech Power (NYSE:STP) and large cap Huaneng Power International (NYSE:HNP).
Investors looking for action will find it on the overbought screen today. China Unicom (NYSE:CHU), the second largest Chinese mobile carrier, has been on fire following the release of March interim results. The company has been adding 3G subscribers at the fastest pace for 2011, lifting investor sentiment.
Ctrip.com Inc. (NASDAQ:CTRP) is one of the largest NASDAQ listed Chinese stock, offering trading and investment opportunities for the prudent investor. Melco Crown Entertainment (NASDAQ:MEPL) is more of a trading stock but has been excellent vehicle for day traders in the past. The good news is that both stocks have ample volume and have pulled back just enough to turn Monday into a potentially good trading day, according to the overbought chart below.
Synutra International (NASDAQ:SYUT) has approached theoretical lows, just like Suntech Power (NYSE:STP) did. Downside risk is low for both stocks albeit it's difficult to say when these stocks are going to turn around.
The oversold momnitor picked up the sudden fall of Huaneng Power International (NYSE:HNP). With oil prices out of the roof, power generators are feeling a pinch in China where retail electricity prices are set by the government. The stock has more downside risk according to the oversold chart below.
Overbought A technical condition that occurs when prices are considered too high and susceptible to a decline. Overbought conditions can be classified by analyzing the chart pattern or with indicators such as the one above. A sharp advance from $15 to $30 in 2 weeks might lead a technician to believe that a security is overbought. Or, a security is sometimes considered overbought when the stock is trading out of its trading envelope and is approaching the theoretical high. It is important to keep in mind that overbought is not necessarily the same as being bearish. It merely infers that the stock has risen too far too fast and might be due for a pullback.
Oversold A technical condition that occurs when prices are considered too low and ripe for a rally. Oversold conditions can be classified by analyzing the chart pattern or with indicators such as the one above. A sharp decline from $30 to $15 in 2 weeks might lead a technician to believe that a security is oversold. Or, a security is sometimes considered oversold when the stock is trading below its trading envelope and is approaching theoretical lows. It is important to keep in mind that oversold is not necessarily the same as being bullish. It merely infers that the security has fallen too far too fast and may be due for a reaction rally.