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Earnings and China stock extremes

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play_1 May 17, 2011 (Chinavestor) CNInsure Inc. (NASDAQ:CISG) went ballistic after a non-binding proposal to go private was received. Telestone Technologies (NASDAQ:TSTC) advanced 20% intraday after a sound first quarter report, settling 10.2% higher by the end of the day. Despite the sizable lift, the stock is not overbought. Mindray Medical (NYSE:MR) gave back all of its gains by the end of the trading day but has momentum, according to the overbought chart below. WuXi Pharmatech (NYSE:WX) and China TechFaith Wireless (NASDAQ:CNTF) are looking similar from a technical point of view.

The number of oversold China stocks is definitely on the rise. China Housing & Land Development (NASDAQ:CHLN), UTStarcom (NASDAQ:UTSI), China GrenTech (NASDAQ:GRRF) and Linktone Ltd. (NASDAQ:LTON) have all approached theoretical lows. Solar maker LDK Solar (NYSE:LDK) and Sutor Technologies (NASDAQ:SUTR) are all trading at extremes.

Stocks with momentum are promising when market sentiment is sound. This implies Telestone Technologies (NASDAQ:TSTC) may be able to extend gains.

Mindray Medical (NYSE:MR) had a very strong momentum, but that might change should market sentiment turn sour.

WuXi Pharmatech (NYSE:WX) is trading out of its trading range, just like Mindray Medical (NYSE:MR). These stocks need market momentum to keep go higher - else are vulnerable to correction.

Downside risk exceed upside potential for China TechFaith Wireless (NASDAQ:CNTF), according to the overbought monitor. The stock advanced too much, too fast and might be up to a short term correction.

OB_2011517

China Housing & Land Development (NASDAQ:CHLN) fell hard after 2011 Q1 report.

UTStarcom (NASDAQ:UTSI) continued to deteriorate amid light volume, just like China GrenTech (NASDAQ:GRRF) and Linktone Ltd. (NASDAQ:LTON). These stocks have relatively low volume making it harder to make a comeback.

LDK Solar (NYSE:LDK) has ample volume and might pop, should outlok for the sector improve.

OS_2011517

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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