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Selected China stocks make a comeback

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advance9 August 30, 2011 (Chinavestor) Even a 7% rally can send a normally flat stock to overbought position as Agria Corp. (NYSE:GRO) gave testimony of that. But it was small cap China Infrastructure Development (NASDAQ:CIIC) that rocked the house with a 50% plus surge on Monday. "New kid" on the overbought block that investors may want to pay attention to are Home Inns & Hotels Management (NASDAQ:HMIN), China Unciom (NYSE:CHU) and Fushi Copperweld (NASDAQ:FSIN). Both NYSE listed Chinese airliners, China Southern Airlines (NYSE:ZNH) and China Eastern Airlines (NYSE:CEA) are among the most overbought Chinese stocks albeit none of the them are trading at extremes. Just as predicted, oversold Changyou.com Inc. (NASDAQ:CYOU) bounced back up along with trading stock Melco Crown Entertainment (NASDAQ:MPEL). Back to the overbought screen. Agria Corp. (NYSE:GRO)advanced too much, too fast and is ready to take a breather. History has taught us that low volume stocks like this find it difficult to keep momentum going.

Home Inns & Hotels Management (NASDAQ:HMIN) advanced 7.5% on Monday and was among the best performing NASDAQ listed Chinese stocks. The good news is that despite a noticeable advance, the stock is far from overbought leaving plenty of room to the upside.

China Unciom (NYSE:CHU) is the NYSE counterpart of Home Inns & Hotels Management (NYSE:HMIN). China's second largesst mobile carrier was among the best NYSE listed Chinese stocks on Monday with upside potential for Tuesday.

Earnings sank Fushi Copperweld (NASDAQ:FSIN) on August 5 but the stock has recovered 15% since hitting a bottom on August 11. The stock is looking good on the overbought chart with more potential upside.

China Southern Airlines (NYSE:ZNH) and China Eastern Airlines (NYSE:CEA) are among the most overbought China stocks on Tuesday. Lower oil prices helped lift the sector and now strong corporate earnings keep pushing the higher. China Eastern Airlines (NYSE:CEA) reported a 26% increase in net profits just yesterday, adding more fuel to the upside.

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We wrote yesterday that Changyou.com Inc. (NASDAQ:CYOU) and trading stock Melco Crown Entertainment (NASDAQ:MPEL) are poised to do well on Monday. Both stocks did, highlighting how technical indicators can be used properly. "Stocks with volume and an oversold position offer turnaround opportunities, such as Changyou.com Inc. (NASDAQ:CYOU) and trading stock Melco Crown Entertainment (NASDAQ:MPEL)." China stocks at extremes, Aug. 29

That said, none of the rest of the oversold China stock list indicates much for Tuesday. 

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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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