July 11, 2011 (Chinavestor) China Mobile (NYSE:CHL) is obviously overbought but she is not the only China stock vulnerable to a pull back. Melco Crown Entertainment (NASDAQ:MPEL) and Petrochina Co. Ltd. (NYSE:PTR) have stepped way out of their trading ranges putting them into a tight spot. Stocks with sound momentum from last week include SouFun Holdings (NYSE:SFUN), Baidu.com Inc. (NASDAQ:BIDU), 51job Inc. (NASDAQ:JOBS), and NetEase.com Inc. (NASDAQ:NTES). China Life Insurance (NYSE:LFC) is a large cap NYSE listed ADR like CHL with somewhat similar technical reading.
But China Mobile (NYSE:CHL) is obviously the one that's in the danger zone. The stock has reached theoretical highs last Friday and is ready for a breather.
Melco Crown Entertainment (NASDAQ:MPEL) may not be as close to theoretical highs as CHL but the pace of advance last week calls for attention. China Sky One Medical (NASDAQ:CSKI) is just like MPEL: advanced too much, too fast.
Petrochina Co. Ltd. (NYSE:PTR), China's largest oil producer, stepped out of its trading range last week. but with price of oil back under $95 a barrel, short term outlook for the stock is negative.
Soufun Holdings (NYSE:SFUN) is not trading at extremes at this point but is expected to feel a pinch on Monday.
Baidu.com Inc. (NASDAQ:BIDU) has gained momentum last week and closed above its trading range last Friday. When market sentiment is negative, downside risk exceeds upside potential for the stock.
51job Inc. (NASDAQ:JOBS) and Netease.com inc. (NASDAQ:NTES) rose last week ahead of earnings. But both stocks are similiar to Baidu.com (NASDAQ:BIDU) from a technical point of view: while not overbought yet vulnerable when markets head south.
China Life insurance (NYSE:LFC) is like Petrochina Co. Ltd. (NYSE:PTR). both are large cap stocks with home market in Hong Kong. Both fell hard in Asia this morning after sizable gains last week. Downside risk exceeds upside potential.
Despite a disappointing last Friday, there are no oversold China stocks at the moment. JA Solar Holdings (NASDAQ:JASO) fell had but hasn't reached theoretical lows yet. There is room left to downside...
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.