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Earnings move China stocks in August

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profit_1 August 16, 2011 (Chinavestor) Advanced Battery (NASDAQ:ABAT) soared 17.8% on top of Friday's gains and became overbought. Downside risk exceeds upside potential for Xinyuan Real Estate (NYSE:XIN) and Giant Interactive (NYSE:GA) according to the overbought chart. China XD Plastics (NASDAQ:CXDC) looks to have more upside left despite a record day on Monday. Investors have started to accumulate NetEase.com Inc. (NASDAQ:NTES) and LDK Solar (NYSE:LDK) shares before earnings releases later the week. Huaneng Power International (NYSE:HNP) has the highest chance to bounce back up, according to the oversold monitor.

Most of the action is taking place on the overbought end of the China stock universe. Advanced Battery (NASDAQ:ABAT) has reached theoretical highs and is ready for a break as the following chart suggests.

The sharp advance of Xinyuan Real Estate (NYSE:XIN) makes technical indicators screaming. The stock advanced too much, too fast according to the overbought monitor. Technical reading is the same for Giant Interactive (NYSE:GA).

China XD Plastics (NASDAQ:CXDC) beat estimates and guided higher, igniting the stock on Monday. Despite the huge jump, more upside is possible if the overbought monitor was right.

NetEase.com Inc. (NASDAQ:NTES) is a stock with sustainable momentum. The company will report earnings later the week but has sound momentum going into that. The same is true for LDK Solar (NYSE:LDK)and for the solar sector in general. Expect some awesome rally should NTES and/or LDK beat estimates.

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Jinko Solar (NYSE:JKS) may be trading closest to theoretical lows, but it's Huaneng Power International (NYSE:HNP) that has a real chance to shine today. China's largest independent power generator is not oversold to the extremes but fundamentals go in her way. Lower coal prices seem to stay, making a case for oversold Huaneng Power International (NYSE:HNP).

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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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