June 20, 2011 (Chinavestor) The oversold end of the China stock universe is swamped but the overbought end lacks action on Monday. Huaneng Power International (NYSE:HNP), the largest independent Chinese power producer, scrapes theoretical lows along with Sina Corp. (NASDAQ:SINA). Smaller cap Nam Tai Electronics (NYSE:NTE) and Shanda Games (NASDAQ:GAME) have all approached theoretical lows but with some notable difference. The online gaming sector is under pressure for most of its components are among the 25 most oversold Chinese stocks. Perfect World (NASDAQ:PWRD), Giant Interactive (NYSE:GA) and Shanda Interactive (NASDAQ:SNDA) are all oversold to a different degree. Search engine giant Baidu.com Inc. (NASDAQ:BIDU) is feeling the pressure but is not considered oversold to the extremes at this point.
Looking at the oversold China stock screen below, it is apparent that Huaneng Power International (NYSE:HNP) is oversold. But large caps are driven by market sentiment and as such can't fight the market. All told, short term outlook is still uncertain for HNP.
Sina Corp. (NASDAQ:SINA) fell from grace in the past three months. The stock was trading at all time highs in April touching over $140/share, just to see it crumbling down to the $80s. The stock is oversold and has a chance to bounce back up as soon as market sentiment improves.
Nam Tai Electronics (NYSE:NTE) has fallen for the past five days and is considered oversold at this point. Shanda Games (NASDAQ:GAME) collapsed last Friday, "keeping down" with the rest of the sector. We noted the technical weakness of the online gaming sector several times last week. Giant Interactive (NYSE:GA) and Perfect World (NASDAQ:PWRD) have all been on the oversold reports of last week.
Shanda Game's (NASDAQ:GAME) ills spell trouble for its controlling shareholder, Shanda Interactive (NASDAQ:SNDA). While more downside is possible and likely for the sector, bottom fishers might find entry positions to the sector sometime the middle of the week.
Internet stocks fell hard as is evidenced by the appearance of Baidu.com Inc. (NASDAQ:BIDU) among the most oversold 25 China stocks. Industry leaders follow overall market sentiment for the most part, as is the case with Baidu.com (NASDAQ:BIDU). While the stock has a lot upside potential from a technical point of view, short term direction remains uncertain.
There is not a single overbought China stock to speak. Guangshen Railway (NYSE:GSH) was able to eke out some gains but is far from an extreme overbought position.
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.