June 21, 2011 (Chinavestor) A good market day is all oversold China stocks need. While there has been some changes to the most oversold China stock list lately, there are some prominent names that are worth paying attention to. Sina corp. (NASDAQ:SINA) is one of them, a stock that fell almost 50% just in two months. Then there is Spreadtrum Communications (NASDAQ:SPRD) that's been volatile with a huge negative bias. Online gamers fell hard, with names like Shanda Interactive (NASDAQ:SNDA), Giant Interactive (NYSE:GA) or Shanda Games (NASDAQ:GAME) among the most oversold China stocks. New Oriental Education & Tech. Group (NYSE:EDU) is another industry leader that draws attention. But investors have to be careful with what they see on the chart below. While Vimicro Int. Corp. (NASDAQ:VIMC), Agria Cortp. (NYSE:GRO), Jinpan Int. (NASDAQ:JST) or China Transinfo Tech (NASDAQ:CTFO) may seem like the most oversold China stocks, their low trading volume renders technical indicators useless. So instead, let's concentrate on names that have real trading volume.
Sina corp. (NASDAQ:SINA) is a highly liquid Chinese internet stock that's been punished the most. Baidu.com Inc. (NASDAAQ:BISU) and Sohu.com Inc. (NASDAQ:SOHU) fell hard but not nearly as severely as Sina Corp. (NASDAQ:SINA). This stock offers buying opportunity according to the oversold chart below.
Spreadtrum Communications (NASDAQ:SPRD) is another liquid Chinese stock that fell hard and is ready for a comeback.
Online gamers all suffered as today's oversold chart testifies. Perfect world (NASDAQ:PWRD) advanced 3.86% on Monday and is off the chart but the rest of the industry remains. All they may need is a sound market day. Stocks with the most upside potential include Shanda Interactive (NASDAQ:SNDA), Giant Interactive (NYSE:GA) and Shanda Games (NASDAQ:GAME).
Flagship of the education sphere, New Oriental Education & Tech. Group (NYSE:EDU), is another contender for a pop. The stock is trading at $100 level, far off from the $120s just a month ago.
China stocks with momentum is hard to find, let alone overbought ones. The indicator is just a reflection of how much momentum Chinese stocks have lost.
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.