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XIN jumps but telcos, energy stay stuck

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bull_bear_3 August 11, 2011 (Chinavestor) Xinyuan Real Estate (NYSE:XIN) surged 13.3% on Wednesday on top of Tuesday's gain and is up over 30% for the week. Giant Interactive (NYSE:GA) is another stock of interest on the overbought monitor. But with the DJIA surrendering most of its previous gains on Wednesday, the oversold end of the China stock universe is the focus of interest, obviously. Petrochina Co. Ltd. (NYSE:PTR) is the most oversold China play at he moment. China Petroleum & Chemical Corp., known as Sinopec, (NYSE:SNP) looks oversold almost as much. But a heavy sell-off hit the telecommunications sector as well as position of China Unicom (NYSE:CHU) and China Telecom (NYSE:CHA) testify. Huaneng Power Int. (NYSE:HNP) reported earnings but failed to impress investors and thus remains oversold. AsiaInfo-Linkage (NASDAQ:ASIA) is the most oversold NASDAQ listed China stock at the moment along with China XD Plastics (NASDAQ:CXDC) and UTStarcom (NASDAQ:UTSI). China Automotive Systems (NASDAQ:CAAS) failed to take advantage of Tuesday's rally and Shanda Interactive (NASDAQ:SNDA) remains volatile.

Back to the overbought screen. Xinyuan Real Estate Co (NYSE:XIN) defied market and continued to surge on Wednesday. Despite a 30% plus surge in the past few days the stock is not overbought yet. More upside is possible, according to the chart below.

Online gamers have started to recover as well. Giant Interactive (NYSE:GA) recovered after a sharp downturn yesterday as investors digested second quarter earnings. Shanda Interactive (NASDAQ:SNDA), formerly the industry leader, is off the oversold chart thanks to a sizable rally on Tuesday. While GA and SNDA have shown some advances lately, further upside far from guaranteed.

OB_2011811

Petrochina Co. Ltd. (NYSE:PTR), the largest oil producer in China, became oversold after a 5% drop on Wednesday. While the stock is oversold, immediate snap back is not guaranteed when fundamentals have the upper hand like these days. Price of oil remains in limbo and has been off the $100 mark by 25% for the past two weeks giving no relief to the sector. China Petroleum & Chemical Corp. (NYSE:SNP), China's largest oil refiner, is feeling the pinch as well and is ready to snap back - as soon as oil price recover.

Telecommunication stocks continued to slide and are now considered oversold, according to the chart below. China Unicom (NYSE:CHU) and China Telecom (NYSE:CHA) are both oversold and have probably hit bottom, at least for the now. Fundamentals are different for the telecommunications sector than for energy, giving much needed break for the stocks.

China's largest independent power generator, Huaneng Power Int. (NYSE:HNP), is oversold and is expected to level off at a minimum.

Volatile NASDAQ stocks are on the move as well. AsiaInfo-Linkage (NASDAQ:ASIA) is considered oversold with limited downside risk from here. UTStarcom (NASDAQ:UTSI) has been trading in a narrow range and is far from theoretical lows, suggesting more downside is possible.

China Automotive Systems (NASDAQ:CAAS) lost over 35% for the month and is oversold but again, chances of a quick turnaround are slim when fundamentals are behind the slide. And that's exactly the case here. The company lowered revenue guidance along with a dismal second quarter financial report. Don't expect a quick recovery anytime soon, investor. 

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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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