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Will momentum persist for Chinese stocks?

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advance_8 July 15, 2011 (Chinavestor) It may be China Sky Medical (NASDAQ:CSKI) that's on the top of the overbought chart but that's not the real story here. China Southern Airlines (NYSE:ZNH) is looking good despite latest advances. Online gamer NetEase.com Inc. (NASDAQ:NTES) and trading stock Melco Crown Entertainment (NASDAQ:MPEL) are ready to jump as well. Internet darlings Sina Corp. (NASDAQ:SINA), 51job Inc. (NASDAQ:JOBS) and Ctrip.com (NASDAQ:CTRP) have traded in tight range but might surprise investors to the upside. Big losers on the oversold monitor worth paying attention to include Mindray Medical (NYSE:MR), Aluminum Corp. of China (NYSE:ACH), China Unicom (NYSE:CHU) and Yanzhou Coal Mining (NYSE:YZC). Solar maker JA Solar (NASDAQ:JASO) and Jinko Solar (NYSE:JKS) aren't out of the woods yet either.

Back to the overbought screen. China Southern Airlines (NYSE:ZNH) ended the week on a high note in Asia surging over 6% on Friday. The stock is far from overbought and chances are high that it will do well on Friday.

Investors have embraced number one online game developer and operator NetEase.com Inc. (NASDAQ:NTES) before earnings. Despite latest advances, more upside is possible.

The same is true for volatile Melco Crown Entertainment (NASDAQ:MPEL). The stock attracts large volume making it ideal for trading purposes. The stock has upside left according to the overbought monitor albeit upside is not guaranteed.

Investors have started to embrace internet players before the earnings season kicks in. Sohu.com Inc. (NASDAQ:SOHU) will report on August 1st along with Changyou.com Inc. (NASDAQ:CYOU). Sina Corp. (NASDAQ:SINA) has been trading in a tight range during these turbulent times and has upside left. The same is true for 51job Inc. (NASDAQ:JOBS) and Ctrip.com (NASDAQ:CTRP) according to the chart below.

OB_2011715

Stocks with significant losses include Mindray Medical (NYSE:MR), a mid sized Chinese medical equipment maker. Resource players were hit in Hong Kong on Friday, boding ill for Aluminum Corp. of China (NYSE:ACH). But outlook is different for China Unicom (NYSE:CHU) and Yanzhou Coal Mining (NYSE:YZC) for these stocks have a chance to shine on Friday. JA Solar (NASDAQ:JASO) made a comeback on Wednesday but may be that's all it had for the week. Downside risk exceeds upside potential for Jinko Solar (NYSE:JKS) as well.

OS_2011715

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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