July 25, 2011 (Chinavestor) Let's take a look beyond the obvious, like China Mobile (NYSE:CHL), on the overbought monitor today. Chinese airliners have room left to the upside. Internet hopeful 51job Inc. (NASDAQ:JOBS), Baidu.com Inc. (NASDAQ:BIDU) and NetEase.com Inc. (NASDAQ:NTES) are looking good despite latest advances. Fushi Copperweld (NASDAQ:FSIN) enjoyed a rally that may well continue, according to the overbought chart. But Melco Crown Entertainment (NASDAQ:MPEL) stepped out of its trading range and is highly vulnerable to negative market sentiment. ATA Inc. (NASDAQ:ATAI) is oversold but more downside is possible for CNOOC Ltd. (NYSE:CEO) as the second chart testifies.
Back to the overbought screen. China Mobile (NYSE:CHL), the largest Chinese mobile operator, reached theoretical highs after an unusual climb and is ready to take a breather.
AgFeed Industries (NASDAQ:FEED) is another stock trading at extremes. Downside risk exceeds upside potential.
But outlook is brighter for Chinese airliners for two reasons. For one, the unfortunate train collision in China bodes well for alternative transportation industries, like airliners. And for two, both Chinese airliners are looking good on the overbought screen today. China Eastern Airlines (NYSE:CEA) has been trailing larger rival China Southern Airlines (NYSE:ZNH), giving more upside potential for the smaller competitor.
Internet stocks are about to kick off the earnings season in August. Sohu.com Inc. (NASDAQ:SOHU) will report on August 1st. along with Changyou.com Inc. (NASDEAQ:CYOU), its former online game unit. Sina Corp. (NASDAQ:SINA) is going to follow suit with 51job Inc. (NASDAQ:JOBS) coming online on August 4th. Baidu.com Inc. (NASDAQ:BIDU) is scheduled to report today after the market close but hopes are high that it will rock the boat with a better than expected report, again. Online game darling NetEase.com Inc. (NASDAQ:NTES) will report later the month. Yet all these internet stocks are far from the overbought position leaving room to the upside!
Fushi Copperweld (NASDAQ:FSIN) looks similar to these internet stocks on the overbought screen below.
But investors have to exercise caution with trading stock Melco Crown Entertainment (NASDAQ:MPEL). This large volume but highly volatile stock is subject to market fluctuations and as such have elevated downside risk.
Looking at the oversold chart, ATA Inc. (NASDAQ:ATAI) is obviously trading at extremes. But given the absolutely low volume, technical indicators are useless.
Stock with an unusual dive includes CNOOC Ltd. (NYSE:CEO), a Chinese offshore oil producer.But despite the latest dive, the stock hasn't reached theoretical llows yet, suggesting more downside is possible.
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.