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Technical reading of Chinese internet stocks

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sina_logo July 14, 2011 (Chinavestor) Despite a strong market day on Wednesday, most Chinese internet stocks have upside left, according to the overbought chart below. Number one online game developer and operator, NetEase.com Inc. (NASDAQ:NTES) is looking good just like Sina Corp. (NASDAQ:SINA), operator of one of the largest internet portals in China. Search engine king Baidu.com Inc. (NASDAQ:BIDU) is far from theoretical highs as well. Smaller internet players such as Qihoo 360 Technology (NYSE:QIHU) and SouFun Holdings (NYSE:SFUN) are looking good as well. Quick look at the oversold monitor reveals that despite significant losses, downside risk persists for JA Solar (NASDAQ:JASO) and ChinaEdu Cirp. (NASDAQ:CEDU).

Back to the overbought screen. Other than China Sky One Medical (NASDAQ:CSKI), there are no overbought China stocks at the moment. This is good news for NetEase.com Inc. (NASDAQ:NTES) or Sohu.com Inc. (NASDAQ:SOHU). Prominent internet stock Sina Corp. (NASDAQ:SINA) is far from being overbought, just like Baidu.com Inc. (NASDAQ:BIDU). Talking about Baidu.com Inc. (NASDAQ:BIDU). China's largest search engine company is about to reveal second quarter financials soon, creating the buzz that drives stock prices higher.

Smaller internet stocks, like Qihoo 360 Tech (NYSE:QIHU) got piggybacked and have more upside potential left. 

OB_2011714

JA Solar (NASDAQ:JASO) is the second most oversold stock at the moment after Jinko Solar (NYSE:JKS). But both stocks are in a distance from theoretical low points, suggesting more downside is possible. The same is true for ChinaEdu Corp. (NASDAQ:CEDU).

OS_2011714

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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