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Large and small cap China stock extremes

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telescope1 August 26, 2011 (Chinavestor) Small cap, not that liquid Chinese stocks are the most active on the overbought screen today. China Infrastructure Investment Corp (NASDAQ:CIIC) is the most overbought China stock at the moment. China Natural Resources Inc. (NASDAQ:CHNR) is another stock trading at relative extremes with elevated downside risk. Upside for the short term looks limited for Agria Corp. (NYSE:GRO) and China XD Plastics (NASDAQ:CXDC) as well.

Stocks with momentum that have ample volume and significant market cap in addition, include China Mobile (NYSE:CHL), China Southern Airlines (NYSE:ZNH) and China Unicom (NYSE:CHU).

Online gamers are all over the place. Perfect World (NASDAQ:PWRD) is not at extremes despite a significant bump up following earnings release. Changyou.com (NASDAQ:CYOU) has limited downside now that it is trading at an extreme oversold position.

Investors may wonder where the bottom may be for China Techfaith Wireless Comm. Tech. Ltd (NASDAQ:CNTF) and Vanceinfo Technologies (NYSE:VIT), but that is hard to tell at this point. One thing looks for sure: both have more downside potential left.

Back to the overbought screen. China Infrastructure Investment Corp (NASDAQ:CIIC) surged over 30% and became overbought. Given the relatively low volume, the stock has limited upside left. The same is true for similar stocks, such as China Natural Resources Inc. (NASDAQ:CHNR) or Agria Corp. (NYSE:GRO). These companies are not overbought to the extreme yet but don't have the necessary volume to keep them go higher.

China XD Plastics (NASDAQ:CXDC) is somewhat different, but looks to have reached its upside potential for now. The company reported strong Q2 and Morgan Stanley invested $100 million into convertible bonds, resulting in a significant jump in the stock price. CXDC Jumps 38%. What's next? But there is no indication that the stock will be able to break through the $5 resistance level at this time.

Chinese telecommunication stocks made a comeback in August. China Mobile (NYSE:CHL) and China Unicom (NYSE:CHU) are looking good on the overbought chart at this point. Both have upside potential left. However these large caps are sensitive to market sentiment.

China Southern Airlines (NYSE:ZNH) is benefiting from lower oil prices and is looking good on the overbought chart today. Smaller rival China Eastern Airlines (NYSE:CEA) is almost as good from a technical point of view. Both have upside potential left.

Perfect World (NASDAQ:PWRD), a Chinese onlien game developer and operator, is looking good as well. The stock went from an $18 to $22 following a robust second quarter, but additional upside looks limited. The situation look similar to that of China CD Plastics (NASDAQ:CXDC). Investors don't seem to find a reason for more upside. 

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Contrary to Perfect World (NASDAQ:PWRD), Changyou.com (NASDAQ:CYOU) is suffering. The stock is trading below its trading range and has approached theoretical lows. This implies the bottom is near with a chance for a comeback.

The bad news is that China Techfaith Wireless Comm. Tech. Ltd (NASDAQ:CNTF) and Vanceinfo Technologies (NYSE:VIT) haven't reached theoretical low points yet. More downside is possible!

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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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