April 29, 2011 (Chinavestor) There hasn't been much change on the overbought China stock monitor since yesterday. Latest financials of Baidu.com (NASDAQ:BIDU) were not as robust as some investors hoped for and caused the internet sector loose direction. Sohu.com Inc. (NASDAQ:SOHU) and Changyou.com Inc. (NASDAQ:CYOU) traded in a narrow range on Thursday along with Sina Corp. (NASDAQ:SINA). Outlook is mixed for the Chinese solar sector following a disappointing quarter from ReneSola Ltd. (NYSE:SOL).
Investors have to go to the oversold end of the China stock market to find stock extremes. Linktone (NASDAQ:LTON) has approached theoretical lows, but Huaneng Power Int. (NYSE:HNP) is unusually oversold as well. Despite significant declines, more downside is possible for 51job Inc. (NASDAQ:JOBS) and China Life Insurance Co. (NYSE:LFC) though, according to the oversold chart.
China Fire & Security Group (NASDAQ:CFSG) and GigaMedia Ltd. (NASDAQ:GIGM) continue to be on the top of the oversold China stock screen. Downside risk remains elevated for both stocks.
Larger cap, high volume trading stock are interest for investors though. Sohu.com Inc. (NASDAQ:SOHU) jumped earlier the week following robust profit growth in the first quarter. Changyou.com Inc. (NASDAQ:CYOU), the former online game unit of SOHU, did the same. Both stocks stepped way above their normal trading range and are trading near all time highs. But both stocks have experienced some consolidation near the top, preparing them for more upside. Sohu.com Inc. (NASDAQ:SOHU) is trading far from theoretical highs, leaving room to the upside - albeit market sentiment will have to come to support to reach its full potential. The bad news is that Baidu.com inc. (NASDAQ:BIDU) fell on Thursday following quarterly report, making the internet sector vulnerable to a correction. Sina Corp. (NASDAQ:SINA) may feel the pinch as well, experience has taught us.
Oversold stocks of interest include large cap Huaneng Power Int. (NYSE:HNP) the most. The stock is trading close to theoretical lows and is expected to bounce back.
But it's not the case for 51job Inc. (NASDAQ:JOBS) and China Life Insurance Co. (NYSE:LFC) though. Both stocks have more downside left, 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.