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China stocks on the move after volatile week

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bear_bull August 22, 2011 (Chinavestor) Qihoo 360 Technology (NYSE:QIHU) is trading closest to theoretical highs but is far from overbought. More upside is possible for General Steel (NYSE:GSI) and China XD Plastics (NASDAQ:CXDC) as well, despite significant gains last week. China Fire & Security (NASDAQ:CFSG), Spreadtrum Communications (NASDAQ:SPRD), Xinyuan Real Estate (NYSE:XIN) all have upside potential left on the chart below. China Unicom (NYSE:CU) is back where it was two weeks ago and looks get stuck in the rut. Changyou.com Inc. (NASDAQ:CYOU) is more oversold and has a chance for a comeback. NetEase.com Inc. (NASDAQ:NTES) reported last week, hurting the rest of the sector. Suntech Power (NYSE:STP) fell along sector weakness after LDK Solar (NYSE:LDK) lowered guidance before earnings. Both stocks fell hard but are not oversold yet. More downside looks possible, according to the oversold chart.

The good news is that there is not a single overbought China stock at the moment. Even Qihoo 360 Technology (NYSE:QIHU), a stock that is on top of the chart, is far from price extremes. Strong earnings helped this stock among others to climb despite a volatile market last week. Spectacular rise of General Steel (NYSE:GSI) and China XD Plastics (NASDAQ:CXDC)last week hasn't sent the stock over the board yet. More upside is possible!

The overbought chart detected earings related momentum for China Fire & Security (NASDAQ:CFSG), Spreadtrum Communications (NASDAQ:SPRD), Xinyuan Real Estate (NYSE:XIN). All these stocks need is sound market sentiment at this point.

OB_2011822

Changyou.com Inc. (NASDAQ:CYOU) is the most oversold China stock at the moment. Online game developers and operator fell hard after industry leader NetEase.com Inc. (NASDAQ:NTES) reported earnings. And while the numbers were impressive, the stock couldn't fight the market on Thursday and fell 9.5% for the day. Smaller players suffered, like Changyou.com (NASDAQ:CYOU) and the Shandas.

Losses were not limited to the online game sector. Solar stocks fell apart following a press release from LDK Solar (NYSE:LDK). The company lowered revenue forecast before earnings announcement next week, sending its stock 23% lower for the day. Suntech Power (NYSE:STP) felt the pinch and gave up just shy of 10% on Friday as well. But none of these stocks are oversold yet, suggesting more downside is possible.

China Unicom (NYSE:CHU) is not oversold despite trading close to theoretical lows. It is just trading in a narrow range compared to its price two weeks ago. No signal of imminent break out from current price.

OS_2011822

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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