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Overbought China stocks w/ momentum

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risk_1 July 22, 2011 (Chinavestor) Momentum kept China Mobile (NYSE:CHL) and AgFeed Industries (NASDAQ:FEED) rising on Thursday, a trend that may continue into Friday. But investors have to be careful with smaller names for their fortunes may turn around quickly. China Southern Airlines (NYSE:ZNH) continues to look good on the overbought screen below just like 51job Inc. (NASDAQ:JOBS) and Melco Crown Entertainment (NASDAQ:MPEL). CNOOC Ltd. (NYSE:CEO) is the stock to watch among most oversold China stocks. Large cap stocks with a chance to bottom out include Huaneng Power Int. (NYSE:HNP) and Yanzhou Coal Mining (NYSE:YZC).

China Mobile (NYSE:CHL) is trading closest to theoretical highs and is overbought albeit may continue to go higher. Reason being that the company beat analyst expectation in 3G growth, solidifying its leading position among Chinese telecoms.When fundamentals drive stocks, technical indicators may prove inaccurate.

Chinese food stocks have been on fire, as is evidenced by AgFeed Industries (NASDAQ:FEED). The stock is clearly overbought and the advance looks excessive. Friday may be a good day to take profits.

Chinese airliners have enjoyed lower oil prices and high passenger volume , helping lift shares of China Southern Airlines (NYSE:ZNH) and China Eastern Airlines (NYSE:CEA).Despite recent gains, more upside is possible if the overbought chart is accurate.

51job Inc. (NASDAQ:JOBS) has been the best among internet names, not faltering on Thursday. Outlook remains solid for this stocks as well for Sina Corp. (NASDAQ:SINA) or Sohu.com Inc. (NASDAQ:SOHU). Trading stock Melco Crown Entertainment (NASDAQ:MPEL) has more upside potential as well.

OB_2011722

CNOOC Ltd. (NYSE:CEO) is oversold and is ready to bounce back, according to the oversold monitor. Huaneng Power Int. (NYSE:HNP) and Yanzhou Coal Mining (NYSE:YZC), while not oversold, are stocks at the short term bottom. Expect them to do well in the upcoming days.

OS_2011722

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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