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China stocks plunge in morning trade

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decline_9 July 8, 2011 (Chinavestor) Today's overbought monitor captures the largest moves before the market open (8:00 A.M.) and after the dismal jobs report sent U.S. indices plunging by 10:00 A.M. Small cap, high risk Telestone Corp. (NASDAQ:TSTC) plunged after the open and is off the screen after 30 minutes of trading as well. Investors backed off of Qihoo 360 Tech. (NYSE:QIHU), similarly to TSTC. But  3SBio Inc. (NASDAQ:SSRX) was able to hang on to previous gains and made it to the best 20 China stocks this morning. Petrochina Co. Ltd. (NYSE:PTR) remained resilient but Baidu.com Inc. (NASDAQ:BIDU) fell.

Investors get nervous when markets plunge, hurting small caps the most. Telestone Technologies (NASDAQ:TSTC) fell hard but is coming back as nerves calm down. Qihoo 360 Technologies (NYSE:QIHU) is a much larger company and is expected to be more resilient than TSTC. Baidu.com Inc. (NASDAQ:BIDU) is another mover but is expected to make a comeback as soon as earnings prove optimists right. Petrochina Co. Ltd. (NYSE:PTR) was one of the best performing components of the Hang Seng Index this morning and had a strong back-wind. But should price of oil fall, PTR will be vulnerable.

The overbought indicator after 30 minutes of trading on Friday.

OB_201178_10

The overbought monitor at  8:00 A.M. before the market opening bell.

OB_201178

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.



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