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China internet stocks have upside left

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advance7 July 20, 2011 (Chinavestor) AgFeed Industries (NASDAQ:FEED) pulled back from an extreme overbought position on Tuesday, as expected. China Southern Airlines (NYSE:ZNH) has limited upside according to the overbought chart. Stocks that are looking good despite latest gains are from the internet sphere like Baidu.com Inc. (NASDAQ:BIDU), Sina Corp. (NASDAQ:SINA) or 51job Inc. (NASDAQ:JOBS). NetEase.com Inc. (NASDAQ:NTES) is in sharp contrast to Shanda Games (NASDAQ:GAME), the top two Chinese online game operators. Giant Interactive (NYSE:GA), another Chinese online gamer, is the most oversold Chinese stock at the moment, highlighting what the market anticipates from the sector as the earnings season approaches.Trading stocks are back in play as well; China Automotive Systems (NASDAQ:CAAS) and Melco Crown Entertainment (NASDAQ:MPEL) rode higher on the back of the market.

Downside risk continues to exceed upside potential for AgFeed Industries (NASDAQ:FEED) despite the latest pull back.

Upside looks limited for China Southern Airlines (NYSE:ZNH) as well.China Eastern Airlines (NYSE:CEA), the second largest Chinese carrier by fleet size, may play a catch up with it larger rival and advance more rapidly on Wednesday.

Chinese internet stock have momentum before the earnings season kicks in for the sector. Baidu.com Inc. (NASDAQ:BIDU) is looking good on the overbought screen despite latest gains. The same is true for Sina Corp. (NASDAQ:SINA) and 51job Inc. (NASDAQ:JOBS).

In fact, NetEase.com Inc. (NASDAQ:NTES), is just as good potentially as any of those internet names before. What's interesting is the sharp contrast between online game number one NetEase.com Inc. (NASDAQ:NTES) and Shanda Games (NASDAQ:GAME). This latter is the second largest online game developer and operator in China but is oversold!

Looking at the oversold screen for a moment, it is apparent that Giant Interactive (NYSE:GA), another Chinese online gamer, is trading closest to theoretical lows. This is another evidence about the wide opinion of what the market is expecting from the online game sector before Q2 earnings.

There are two trading stocks that gained momentum as the market picked up. China Automotive Systems (NASDAQ:CAAS) is a volatile, high beta stock that comes handy in an upswing. So is Melco Crown Entertainment (NASDAQ:MPEL), a high volume trading stock. Both stocks have upside left, according to the overbought chart. albeit upside is dependent on market sentiment.

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The Shandas, Shanda Games (NASDAQ:GAME) and Shanda Interactive (NASDAQ:SNDA) are among the most oversold Chinese stocks at the moment. Given that none of them are oversold to the extrems yet, more downside is possible.

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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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