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Earnings move China stocks to extremes

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currency_2 May 13, 2011 (Chinavestor) Chinacast Education (NASDAQ:CAST) became overbought after three days of straight gains. Stocks with unusual volume include WuXi Pharmatech (NYSE:WX), Mindray Medical (NYSE:MR), Jinpan International (NASDAQ:JST) and China TechFaith Wireless (NASDAQ:CNTF) on the overbought chart. Stocks of interest on the oversold end of the China stock universe include LDK Solar (NYSE:LDK), Sutor Tech (NASDAQ:SUTR), Aluminum Corp. of China (NYSE:ACH) and Sina Corp. (NASDAQ:SINA).

Back to the overbought screen. ChinaCast Education (NASDAQ:CAST) advanced over 10% in the past two days after the company reaffirmed 2011 guidance. But the advance is too much, too fast, according to the overbought monitor. A short term correction is likely to follow.

WuXi Pharmatech (NYSE:WX) stepped out of its trading range lately and is vulnerable. The company reaffirmed 2011 revenue guidance earlier the week, setting off the rally. Downside risk now exceeds short term upside potential for both ChinaCast Education  (NASDAQ:CAST) and WuXi Pharma (NYSE:WX)

Chinese medical equipment maker Mindray Medical (NYSE:MR) took a breather on Thursday following two strong market days. The stock is set to go higher should market sentiment cooperate.

Jinpan International (NASDAQ:JST) gaped up but surrendered most of the gains on Thursday. The stock is far from theoretical highs but the sudden advance calls attention.

The overbought monitor picked up the unusual move by China TechFaith Wireless (NASDAQ:CNTF). More upside is possible despite latest surge, if technical indicators can prove accurate.

OB_2011513

LDK Solar (NYSE:LDK) remains to top the oversold China stock chart while Sutor Tech (NASDAQ:SUTR) is nearing the bottom. Resource stocks are hurting on the global sell-off. Aluminum Corp. of China (NYSE:ACH) and Silvercorp Metals (NYSE:SVM) are here to testify of the sudden decline. But the fall was too fast, too soon according to the oversold chart.

Disappointing earnings from Sina Corp. (NASDAQ:SINA) sent the stock 5.5% lower by the end of the trading day. Despite the losses, more downside is possible.

OS_2011513

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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