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Oversold stock list: full house

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decline May 20, 2011 ( Chinavestor) Chinese momentum stocks suffered on Thursday as the overbought chart testifies. There is no overbought China stock at the moment. China Eastern Airlines (NYSE:CEA), ChinaCast Education (NASDAQ:CAST) all pulled back while WuXi Pharmatech (NYSE:WX) and CNinsure (NASDAQ:CISG) eked out a small gain. Most of the action took place on the oversold end of the China stock universe. Yingli Green Energy (NYSE:YGE), Train Solar (NYSE:TSL), ReneSola Ltd. (NYSE:SOL) fell with the rest of the sector. China TransInfo Technology Corp. (NASDAQ:CTFO) continued the slide while Origin Agritech (NASDAQ:SEED) fell on disappointing quarterly report.

Back to the overbought screen. As we said before, technically speaking there is no overbought China stock at the moment. Chinese airliners fell on higher oil/commodity prices while momentum stocks were unable to extend gains. WuXi Pharmatech (NYSE:WX) was able to hold on to gains along with CNinsure (NASDAQ:CISG).

OB_2011520

Small volume China Housing & Land Development (NASDAQ:CHLN) continues to lead the most oversold China stock list. But it's the solar sector that requires attention.  Trina Solar (NYSE:TSL) reported earnings earlier the week, sending chill through the spine of investors. Yingli Green Energy (NYSE:YGE), and ReneSola Ltd. (NYSE:SOL) are feeling the pain of their larger rival.

China TransInfo Technology Corp. (NASDAQ:CTFO) fell seven days in a row and is off over 20% since May 11. The slide looks excessive on the oversold screen suggesting downside risk is minimal.

Fundamentals hurt Origin Agritech (NASDAQ:SEED), a situation when technical indicators are useless. More downside is possible for the stock.

OS_2011520

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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