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China stocks on hold before BIDU earnings

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narrow_range2 April 27, 2011 (Chinavestor) China Fire & Security Group (NASDAQ:CFSG) and GigaMedia Ltd. (NASDAQ:GIGM) are trading closest to theoretical highs and thus are vulnerable. Changyou.com Inc. (NASDAQ:CYOU) has more downside risk than its former parent, Sohu.com Inc. (NASDAQ:SOHU), according to the overbought screen below. Baidu.com Inc. (NASDAQ:BIDU) is on the low end of the list but may jump should earnings - coming later today - surprise investors to the upside.Ctrip.com Inc. (NASDAQ:CTRP) and Melco Crown Entertainment (NASDAQ:MPEL) are volatile stocks that are expected to move along with Baidu.com Inc. (NASDAQ:BIDU).

Devil is always in the details, as we all know. Low volume of China Fire & Security Group (NASDAQ:CFSG) and GigaMedia Ltd. (NASDAQ:GIGM)renders the overbought indicator much less accurate.

But volume is not a problem for Sohu.com Inc. (NASDAQ:SOHU) and Changyou.com Inc. (NASDAQ:CYOU). Both stocks are up following record 2010 first quarter numbers, a fundamental force that can keep these stocks go higher. But the advance was more dramatic for CYOU and thus has higher downside risk than SOHU.

Ctrip.com (NASDAQ:CTRP), Melco Crown Entertainment (NASDAQ:MPEL) and Baidu.com Inc. (NASDAQ:BIDU) have been trading in a narrow range lately. But that may change when Baidu.com (NASDAQ:BIDU) will release first quarter number after the close today.

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Linktone (NASDAQ:LTON), Synutra International (NASDAQ:SYUT) and Longtop Financial (NYSE:LFT) are considered oversold. This suggests a short bounce back up is possible.

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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.

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