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Eyes on China stock extremes

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eye August 25, 2011 (Chinavestor) Technicals matter, suggests the latest pullback of China Mobile (NYSE:CHL), Perfect World (NASDAQ:PWRD) and China Eastern Airlines (NYSE:CEA). Agria Corp. (NYSE:GRO) surged over 20% but volume was not all that indicative of a sustainable rally. Trading stock Melco Crown Entertainment (NASDAQ:MPEL) is down 10% for the last five days and is among the most oversold China stocks. But the worst may not be over for Vanceinfo Technologies (NYSE:VIT), according to the oversold monitor. Shanda Interactive (NASDAQ:SNDA) is stuck on the oversold screen after its online game arm, Shanda Games (NASDAQ:GAME) reported lukewarm quarterly report.

Chinese solar stocks remain active after some key earnings. LDK Solar (NYSE:LDK), Yingli Green energy (NYSE:YGE) and Suntech Power (NYSE:STP) all attracted over average volume as investors try to sort out the latest financials. China Life Insurance (NYSE:LFC) reported a 20% decline in earnings and is falling fast, albeit is not oversold yet.

China Mobile (NYSE:CHL) fell despite a strong showing of the DJIA. Investors locked in profits of China's largest mobile operator and sent shares of smaller China Unicom (NYSE:CHU) and China Telecom (NYSE:CHA) soaring. China Mobile (NYSE:CHL) is not overbought but additional upside is in limbo right now. China Telecom reports quality earnings

Perfect World (NASDAQ:PWRD) took a breather on Wednesday after a large jump a day before. The good news is that when earnings are behind such surges, stock prices don't come back. More upside is possible for Perfect World (NASDAQ:PWRD) now that it took a break.

China Eastern Airline (NYSE:CEA) pulled back and is ready to go higher again. The stock has been trading in a narrow rangeĀ  with a potential to break out. Same is true for China Southern Airlines (NYSE:ZNH), China's largest carrier by fleet size.

China XD Plastics (NASDAQ:CXDC) is not at extremes despite a jump following record earnings. More upside is possible, according to the overbought chart. CXDC Jumps 38%. What's next?

Agria Corp. (NYSE:GRO), a company that lost 50% of its value YTD, is fighting for survival on the NYSE. The stocks surged 26.3% on Wednesday but is still under the $1 mark NYSE requires. The company was notified of "non-compliance with minimum average closing price" just a month ago. From a technical point of view, more upside is possible.

There has been a lot of activity within the solar sector. LDK Solar (NYSE:LDK), Yingli Green energy (NYSE:YGE) and Suntech Power (NYSE:STP). Yingli Green Energy (NYSE:YGE) beat estimates and issued a bullish outlook last week. One darling, one dog - YGE vs CSUN. But LDK Solar (NYSE:LDK) disappointed at the same time. All eyes turned to Suntech Power (NYSE:STP) on Monday and to Trina Solar (NYSE:TSL) on Tuesday to get a better assessment of the sector. Rank of Chinese solar makers based on Q2.

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There is no extremely oversold China stocks at the moment. Yet investors want to realize that Melco Crown Entertainment (NASDAQ:MPEL) is not offering a turnaround opportunity should market sentiment improve. This stock has been very volatile giving quick trading opportunity for day-traders.

Vanceinfo Technologies (NYSE:VIT) is sticking out of the oversold chart but with fundamentals weak, chance of quick turnaround is little.

Shanda Interactive (NASDAQ:SNDA) has been trading in a narrow range despite an earnings release of its online game arm, Shanda Games (NASDAQ:GAME). Investors were not moved by the latest numbers of Shanda Games (NASDAQ:GAME), showing little interest for the stock. But it's worth keeping anĀ  eye on the second largest Chinese online gamer for it lost a quarter of its value in just one month. Should sentiment come back to the sector, GAME offers sizable upside potential.

China Life Insurance (NYSE:LFC) is not on the oversold screen yet but is heading right there. The company reported slow top line growth and net income fell. More downside is certainly is possibility. Large claims related payout hurts LFC profitability

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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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