June 2, 2011 (Chinavestor) After a 280 points dive of the DJIA, there is no overbought Chinese ADR at the moment. Chinese stocks fell hard in Asia as well the following day. Despite a negative market day, Melco Crown Entertainment (NASDAQ:MPEL) was able to extend gains. Stocks of interest on the oversold screen are Spreadtrum Communications (NASDAQ:SPRD), UT Starcom (NASDAQ:UTSI) plus internet darlings 51job Inc. (NASDAQ:JOBS) and Sohu.com Inc. (NASDAQ:SOHU).
First, let's take a look at the most overbought China stock list. China Fire & Sec. Group (NASDAQ:CFSG) remains on top of the list, but that's due to Bain Capital's buyout offer. The stock hasn't got more upside.
Melco Crown Entertainment (NASDAQ:MPEL) is the stock of interest on the list today. The stock has been advancing despite negative market sentiment. More upside is possible, according to the overbought chart below.
China Unicom (NYSE:CHU) and Yanzhou Coal Mining (NYSE:YZC) has more upside as well.
There is no change on the top of the oversold China stock list from yesterday. WSP Holdings (NYSE:WH) continues to be on the top spot, followed by Origin Agritech (NASDAQ:SEED). But investors better pay attention to some higher volume stocks; Spreadtrum Communications (NASDAQ:SPRD) and UT Starcom (NASDAQ:UTSI). Both have volume of over a million shares a day, making them prime investment opportunities. Both stocks have been nearing theoretical lows, suggesting upside potential exceeds downside risk.
The same is treu for 51job Inc. (NASDAQ:JOBS) and Sohu.com Inc. (NASDAQ:SOHU). These large cap NASDAQ listed Chinese stocks will benfit from a market turnaround. Both companies reported very strong 2011 first quarter numbers.
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.