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China small caps at extremes early Sept.

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banace_3 September 6, 2011 (Chinavestor) An increasing number of China small cap stocks are trading at extremes according to the overbought monitor. China Natural Resources (NASDAQ:CHNR) is trading closest to theoretical highs followed closely by Agria Corp. (NYSE:GRO) and Sutor Technology (NASDAQ:SUTR). Not overbought small caps on the move include Spreadtrum Communications (NASDAQ:SPRD), China Grentech (NASDAQ:GRRF), China Infrastructure Development (NASDAQ:CIIC) and Telestone Technologies (NASDAQ:TSTC). The only large cap stock with unusual move is China Unicom (NYSE:CHU) after Labor Day Holiday. The oversold monitor is lacking action with Global Technologies (NASDAQ:GSOL) trading closest to theoretical lows.

China Natural Resources (NASDAQ:CHNR) has more downside risk than  upside potential at this point. Agria Corp. (NYSE:GRO) and Sutor Technology (NASDAQ:SUTR) are looking very similiar to CHNR from a technical point of view. This group of stocks are most likely to take a breather if technical indicators were right.

The next group of stocks of interest include Spreadtrum Communications (NASDAQ:SPRD), China Grentech (NASDAQ:GRRF), China Infrastructure Development (NASDAQ:CIIC) and Telestone Technologies (NASDAQ:TSTC).These stocks have advanced unusually last week but are not trading at extremes yet. This indicates more upside is possible albeit the rate of advance is likely to slow.

China Unicom (NYSE:CHU) has room left to the upside despite latest surge. The stock went from $17.2 to over $21 in two weeks but momentum may carry the stock higher.

OB_201196

Global Technologies (NASDAQ:GSOL)and CNinsure (NASDAQ:CISG) are trading closest to the oversold position but haven't reached theoretical lows yet. They might pop any minute but chances are still slim at this point, according to the oversold indicator below. 

OS_201196

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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