June 16, 2011 (Chinavestor) There is not much to see on the overbought end of the China stock universe, a complete opposite of the oversold end. Huaneng Power International (NYSE:HNP) took the lead on the chart below. Additional stocks of interest include sina Corp. (NASDAQ:SINA), Baidu.com Inc. (NASDAQ:BIDU), New Oriental Education & Tech. (NYSE:EDU) and Shanda Interactive (NASDAQ:SNDA). These stocks are of special interest for their prominent position within their respective industries.
Huaneng Power Int. (NYSE:HNP), China's largest independent power producer, fell just over 1.5% on Wednesday but the 6% plus drop for the past few days is out of the norm for this low beta stock.
Sina Corp. (NASDAQ:SINA) fell 5.2% giving back all of its gains from a day before. The stock is oversold and is a prime candidate for a strong comeback should market sentiment improve.
The same is true for Baidu.com Inc. (NASDAQ:BIDU). China's largest searcch engine company is oversold along the rest of the market, but that may be good news for bottom fishers. While today may be a weak market day, afternoon trading might be a good time for value buyers.
Shanda Interactive (NASDAQ:SNDA), the second largest online game developer and operator in China, fell hard but is less oversold than its NASDAQ counterparts. Downside risk is elevated for Shanda for the upcoming days.
There are no overbought China stocks to speak of this morning, as the following chart testifies. Canadian Solar (NASDAQ:CSIQ) has showns some momentum but that's not all that persuasive yet.
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.