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China stocks offer upside after Q2

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advance5 August 18, 2011 (Chinavestor) General Steel (NYSE:GSI) became overbought and is expected to fall. NetEase.com Inc. (NASDAQ:NTES) is well positioned to rally after earnings for the stock is still trading within its normal trading range. Another bang may come from Qihoo 360 Technology Co Ltd (NYSE:QIHU) for the stock is far from theoretical highs as well. Stocks with upside potential include Home Inns & Hotels Management (NASDAQ:HMIN) and Spreadtrum Communications (NASDAQ:SPRD) on the overbought screen. China CD Plastics (NASDAQ:CXDC) has more upside left despite the latest surge, but real estate stocks are under pressure following a weak performance of E-House Holdings (NYSE:EJ) and China Real Estate Information (NASDAQ:CRIC) on Wednesday. This puts pressure on Xinyuan Real Estate (NYSE:XIN). SinoTech Energy (NASDAQ:CTE) and Vanceinfo Technologies (NYSE:VIT) are the most oversold China stocks but both has serious problems offering little chance for a quick bounce back.

General Steel (NYSE:GSI) has reached theoretical highs and is expected to take a breather. Investors have to remember that overbought is not bearish. It merely implies that General Steel (NYSE:GSI) has risen too fast, too much and is up to a technical correction. But longer term trend may well be bullish.

NetEase.com Inc. (NASDAQ:NTES) has a real chance for a breakout today. The stock is trading within its trading envelope and thus has a lot of upside left. The Company reported earnings last night and surprised to the upside.

Similarly to NetEase.com (NASDAQ:NTES), Qihoo 360 Technology Co Ltd (NYSE:QIHU) reported last night and is ready to take off. There is room left to the upside for the stock as well. Shares of Qihoo 360 Technology Co Ltd (NYSE:QIHU)has been widely volatile in the past, making the stock potentially explosive on Thursday.

Home Inns & Hotels Management (NASDAQ:HMIN) is looking good on the overbought screen as well. The stock swung back from $32.5 to $38 in just two weeks but despite the 20% comeback, it is not overbought.

Spreadtrum Communications (NASDAQ:SPRD) looks very similar to HMIN on the overbought screen and has sufficient trading volume as well.

There is more pressure on Xinyuan Real Estate (NYSE:XIN) going forward after China Real Estate Information (NASDAQ:CRIC) and E-House Holdings (NYSE:EJ) reported earnings yesterday. While revenues grew, earnings fell for both companies, putting pressure on the rest of the sector.

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There is nothing new with Global Sources (NASDAQ:GSOL) on the oversold screen since yesterday. SinoTech Energy (NASDAQ:CTE) fell had following allegation and is not expected to make a quick comeback. Fundamentals continue to hurt Vanceinfo Technologies (NYSE:VIT) giving a quick bounce back a little chance.

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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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