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China stocks extremes for traders

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watch_5 August 4, 2011 (Chinavestor)There are no overbought China stocks at the moment but the oversold screen is full of action. Most Chinese stocks fell along the DJIA in the last 9 sessions but stocks that managed to eke out some gains are worth paying attention to. China Eastern Airlines (NYSE:CEA) is looking good because falling oil prices bode well for the industry. Baidu.com Inc. (NASDAQ:BIDU) is trading at bargain prices given her sound fundamentals. Stocks of interest on the oversold screen include China Yuchai Int. ltd. (NYSE:CYD) as well as energy stocks like Yanzhou Coal (NYSE:YZC) and CNOOC Ltd. (NYSE:CEO). Petrochina Co. Ltd. (NYSE:PTR) fell hard but is still just below here trading range. Shanda Games (NASDAQ:GAME) is feeling the pressure before earnings. Guangshen Railway (NYSE:GSH) is still feeling the pinch after the deadly bullet train accident in China two weeks ago. It's hard to find China stocks that advanced in the past two weeks. China Eastern Airline (NYSE:CEA) has been resilient and has upside thanks to falling energy prices. Baidu.com Inc. (NASDAQ:BIDU) is far from overbought but has a chance to shine once market sentiment improves.

OB_201184

Most of the action is taking place among oversold China stocks. China Yuchai Int. ltd. (NYSE:CYD) fell hard but hasn't reached theoretical lows yet. This imples more downside is possible.

Falling energy prices bode ill for coal and oil producers. This will keep pressure on Yanzhou Coal (NYSE:YZC) and CNOOC Ltd. (NYSE:CEO). Despite recent losses, none of these stocks are considered oversold yet.

China's largest oil producer, Petrochina Co. Ltd. (NYSE:PTR), has more downside left as well. The stock hasn't reached theoretical lows yet.

Investors shun Shanda Games (NASDAQ:GAME) before earnings. Internet stocks fell hard despite record numbers. Sohu.com Inc. (NASDAQ:SOHU) and Baidu.com Inc. (NASDAQ:BIDU) reported record quarters yet failed to gain tracktion.

Guangshen Railway (NYSE:GSH) has more downside left despite recent dive, according to the oversold chart below.

OS_201184

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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