July 26, 2011 (Chinavestor) Large cap China stocks rule the overbought stock screen on Tuesday. Chinese airliners surged following the deadly bullet-train crash over the weekend and internet stocks are looking good following a record second quarter from Baidu.com Inc. (NASDAQ:BIDU). China Mobile (NYSE:CHL) took a breather on Monday, as expected, and is ready to go higher. 51job Inc. (NASDAQ:JOBS) is among the best momentum internet stocks at the moment. The second wave of advancing NASDAQ listed China stocks may come from Ctrip.com Int. (NASDAQ:CTRP), NetEase.com Inc. (NASDAQ:NTES) and Focus Media Holdings (NASDAQ:FMCN). Oversold stocks of interest include Guangshen Railway Co. (NYSE:GSH), Synutra International (NASDAQ:SYUT) and CNOOC Ltd. (NYSE:CEO).
Back to the overbought screen. China Eastern Airlines (NYSE:CEA) is trading closest to theoretical highs but has more upside left, according to the screen below. The stock hasn't reached theoretical highs and when fundamentals drive large cap stocks, the advance typically has legs. This is true for China Southern Airlines (NYSE:ZNH) as well.
This was the case with China Mobile (NYSE:CHL), another large cap stocks, that kept advancing until it reached theoretical highs. Once there, a breather is necessary. This was the case with China Mobile (NYSE:CHL) just yesterday. After a technical break, more upside is possible for China's largest mobile operator as well.
51job Inc. (NASDAQ:JOBS) has some of the best momentum among Chinese internet stocks at the moment. But that's about to change as soon as Baidu.com Inc. (NASDAQ:BIDU) starts trading. China's search engine giant reported way better second quarter numbers than estimated, surging over $10 in pre-market trading hours. BIDU is looking good from a technical point of view as well, the stock is far from theoretical highs of $170.
Strong earnings from BIDU will help other internet stocks such as Ctrip.com Int. (NASDAQ:CTRP) and NetEase.com Inc. (NASDAQ:NTES). Both these companies have ample room left to the upside, according to the overbought screen below.
The screen picked up the advance of Focus Media Holdings (NASDAQ:FMCN), a sstock that is looking good as well.
The deadly bullet train crash over the weekend sent rail stocks tumbling in China, including Guangshen Railway Co. (NYSE:GSH). The stock looks oversold in terms of the pace of the decline. The stock price went from the higher end of its trading range all the way to near theoretical lows, suggesting a bounce back is likely.
Synutra International (NASDAQ:SYUT), a Chinese baby formula maker, fell 12.1% on Monday. But despite the relatively large drop in percentage points, the stock is not oversold - compared to the fall of Guangshen Rail (NYSE:GSH), for example. This implies more downside is possible.
CNOOC Ltd. (NYSE:CEO) has traded below the trading envelope for some time and is expected to come off lows, given that price of oil is back in the $100 range, again.
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.