April 26, 2011 (Chinavestor) Fundamentals and technicals have to be combined, seasoned investors know. This explains the exuberance surrounding Chinese internet stocks lately. Sohu.com Inc. (NASDAQ:SOHU), the fourth most visited Chinese website, reported record quarter on Monday, sending the rest of the sector higher. Changyouc.om Inc. (NASDAQ:CYOU), Sohu's former online game unit, was just as strong contributing big time to SOHU's top and bottom line. But it's going to be quarterly figures of Baidu.com Inc. (NASDAQ:BIDU) on Wednesday that will give investors a real feel about the health of the Chinese online sector. Ctrip.com Inc. (NASDAQ:CTRP) and Home Inns & Hotels Management (NASDAQ:HMIN) are additional stocks of interest on the overbought monitor.
Looking at the overbought monitor below, both Sohu.com Inc. (NASDAQ:SOHU) and Changyou.com Inc. (NASDAQ:CYOU) are trading well above their trading envelope but are far from theoretical highs. This implies more upside is possible for both stocks.
For now, Baidu.com Inc. (NASDAQ:BIDU) is at bay but investors have to remember that the largest Chinese search engine company is explosive and may jump 10% intraday easily.
Stocks with ample volume and additional upside include Ctriup.com Inc. (NASDAQ:CTRP) and Home Inns & Hotels Management (NASDAQ:HMIN). Both companies are yet to report financials but if history can be any guide, investors may be up to a nice surprise.
Synutra International (NASDAQ:SYUT) is remains the mosts oversold China stock at the moment albeit it's not trading closest to theoretical lows. Precision Steel (NASDAQ:CPSL) and Linktone (NASDAQ:LTON) may pop any time.
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.