June 23, 2011 (Chinavestor) Canadian Solar (NASDAQ:CSIQ) and Harbin Electric (NASDAQ:HRBN) enjoyed a few good market days but are far from overbought. Investors looking for action have to go to the oversold end of the China stock universe. Large internet stock Sina Corp. (NASDAQ:SINA) is back on the list after a technical correction on Wednesday. Huaneng Power International (NYSE:HNP) remains oversold but with a dim short term outlook. HSBC Plc. (NYSE:HBC) and New Oriental Education (NYSE:EDU) have been feeling the pinch but more downside is looming around, according to the oversold screen.
First, let's take a look at the overbought chart. Oversold, small cap Chinese solar makers have been on the rebound lately with Canadian Solar (NASDAQ:CSIQ) taking the lead. But China Sunergy (NASDAQ:CSUN) has been on fire as well suggesting more upside is possible for the sector.Harbin Electric (NASDAQ:HRBN)jumped earlier the week and was able to hang on to those gains. But should market sentiment sour, HRBN won't be able to fight the market.
Volatility remains high for Sina Corp. (NASDAQ:SINA) after an 18.5% surge and a technical correction. Nevertheless the stock is oversold relative to the rest of the sector.
Huaneng Power International (NYSE:HNP) is the most oversold China stock at the moment. While this might prompt investors to think its time to buy, they should think twice before jumping on the wagon. HNP won't be able to fight the market and as such has more downside risk left.
Short term outlook is not that bright for HSBC Plc. (NYSE:HBC) and New Oriental Education (NYSE:EDU) either. The bottom might be near but upside potential looks limited at this time.
Many less liquid, small cap stocks are more striking on the oversold screen than those of the big names just mentioned, but technical indicators don't work well for small caps.
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.