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Overbought China stocks slip on debt talks

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decline_9 July 28, 2011 (Chinavestor) Chinese stocks pulled back from extreme overbought positions on Wednesday. China Green Agriculture (NYSE:CGA) continued to advance and is trading closest to theoretical highs. China Eastern Airlines (NYSE:CEA) took a breather on Wednesday but is still way out of its trading range. Stocks with sound momentum include China Mobile (NYSE:CHL), Baidu.com Inc. (NASDAQ:BIDU), Home Inns & Hotels Management (NASDAQ:HMIN) and Ctrip.com Int. (NASDAQ:CTRP). Another internet stock, 51job Inc. (NASDAQ:JOBS) fell hard on Wednesday and is trading neutral right now. Stocks of interest on the oversold screen include China Infrastructure Investment (NASDAQ:CIIC), CNOOC Ltd. (NYSE:CEO) and Guangshen Railways (NYSE:GSH).

Chinese fertilizer maker China Green Agriculture (NYSE:CGA) has made a comeback and is noticed by the overbought monitor. Given the latest advance downside risk is on the rise. But investor have to realize that the stock hasn't reached theoretical highs yet and as such, more upside is possible.

China Eastern Airlines (NYSE:CEA) was the most overbought China stock two days ago and was ready to takek a breather. While the stock fell a bit, more downside is possible before resuming the rally.

Chinese mobile operator China Mobile (NYSE:CHL) is looking a bit better on the overbought screen.

Earnings propelled internet giant Baidu.com Inc. (NASDAQ:BIDU) but the stock fell on Wednesday along the market. More upside is possible for the stock is far from an extreme overbought position.

The same is true for other NASDAQ names that investors like before earnings. Home Inns & Hotels Management (NASDAQ:HMIN) and Ctrip.com Int. (NASDAQ:CTRP) are looking good at this point. 51job Inc. (NASDAQ:JOBS) fell hard but that might be just temporary.

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Despite heavy losses on Wednesday, China Infrastructure Investment (NASDAQ:CIIC) has more downside left. Falling oil prices bode ill for CNOOC Ltd. (NYSE:CEO). Guangshen Railways (NYSE:GSH) may not be out of the woods yet, either. None of these stocks are oversold, suggesting the bottom might be further down.

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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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