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China stocks on the move at the end of August

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Asia_2 August 31, 2011 (Chinavestor) Small cap, low volume China stocks continue to shine on the overbought chart. Agria Corp. (NYSE:GRO) and China Natural Resources (NASDAQ:CNHR) have reached theoretical highs and are in a very vulnerable position right now. China Infrastructure Development (NASDAQ:CIIC) advanced too much, too fast as well, according to the overbought chart. But China Unicom (NYSE:CHU) is looking good despite a 15% rise since last Wednesday. China Mobile (NYSE:CHL) seems to lost some of its shine though.

Most China stocks on the oversold screen seems to get stuck in the rut. Despite losses, the indicator does not suggest an imminent bounce back for Synutra Int. (NASDAQ:SYUT) o for China Real Estate (NASDAQ:CRIC). The situation is different from earlier the week when Changyou.com Inc. (NASDAQ:CYOU) was oversold to the extremes and made a nice comeback.

Back to the overbought screen. The tree China stocks on the chart are clearly overbought. This doesn't mean these stocks will fall but indicates that their upside is limited and the most likely scenario for them is to level off. Agria Corp. (NYSE:GRO) and China Natural Resources (NASDAQ:CNHR) have reached theoretical highs and are ready for a technical correction.

While not at theoretical highs yet, the situation is similar for China Infrastructure Development (NASDAQ:CIIC) from a technical point of view.

Despite a sizable rise more upside looks possible for China Unicom (NYSE:CHU) though. The stock has just stepped above its trading range with plenty of room left to the upside.

While not overbought, China Mobile (NYSE:CHL) is loosing its shine after smaller rivals reported financials. Investors seems to be most impressed with result from China Unicom (NYSE:CHU), sparking a rotation within the sector. While China Unicom (NYSE:CHU) is rolling in the dough China Mobile (NYSE:CHL) is suffering.

OB_2011831

There is not a single oversold China stock at the moment. That said, chances of a quick bounce back is slim for Synutra Int. (NASDAQ:SYUT) and for China Real Estate (NASDAQ:CRIC). To illustrate a difference when a stock is ready for a comeback, take a look at our report on Monday, China stocks at extremes, Aug. 29, when Changyou.com Inc. (NASDAQ:CYOU)was oversold. The stock advanced 11.6% since then. This is an excellent example how to read the oversold chart.

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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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