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Oversold stocks w/ more downside

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decline3 September 13, 2011 (Chinavestor) There isn't much change on the overbought monitor from yesterday. Selected small cap China stocks remain overbought and thus vulnerable with Harbin Electric (NASDAQ:HRBN) and Gushan Environmental Energy (NYSE:GU) taking the lead. Most of the action is taking place on the oversold end of the China stock universe though. Giant Interactive (NYSE:GA) fell apart at the opening bell on Monday but is not oversold yet. Changyou.com (NASDAQ:CYOU) is another online game developer and operator on the oversold monitor. China solar industry leaders fell hard including Trina Solar (NYSE:TSL), Yingli Green Energy (NYSE:YGE) and LDK Solar (NYSE:LDK). Despite sizable declines, none of them are considered oversold yet. China Eastern Airlines (NYSE:CEA) fell below its trading range but remains far from theoretical lows as well.

Back to the overbought monitor. Technical indicators work best for stocks that have substantial trading volume. This isn't a case with Gushan Env. Energy (NYSE:GU) or Harbin Electric (NASDAQ:HRBN). Relatively small money flows can keep these stocks above the rest, rendering technical indicator inaccurate. So while these stocks look overbought, they won't fall necessarily.

Stocks of interest include Sina Corp. (NASDAQ:SINA), a stock that has momentum and volume. This suggests more upside is coming. Another stock is Mindray Medical (NYSE:MR), a Chinese medical equipment maker. This is a mid sized company with ample volume and is showing strength as well.

OB_2011913

Giant Interactive (NYSE:GA) gaped down on Monday and was trading flat from that moment on, but is not oversold yet. The stock is still far from theoretical lows just like Changyou.com (NASDAQ:CYOU). This latter has been trading in a narrow range with no signs of popping.

The China solar industry continues to suffer following weak 2011 Q2 and outlook. When industry leaders lead a decline, the rest is going to follow. The bad news is that despite recent losses, Trina Solar (NYSE:TSL), Yingli Green Energy (NYSE:YGE) and LDK Solar (NYSE:LDK) are not oversold.Trina Solar (NYSE:TSL) fell the most below its trading range but is far from theoretical lows. Yingli Green Energy (NYSE:YGE) is looking very similar to TSL. LDK Solar (NYSE:LDK) has been trading in a narrower range but is clearly following the same pattern. Canadian Solar (NASDAQ:CSIQ) and Jinko Solar (NYSE:JKS) are also among the 25 most oversold Chinese stocks.

China Eastern Airlines (NYSE:CEA) went from $24 stock to $20.7 in September. While the stock is expected to make a comeback, that will have to wait according to the oversodl monitor.

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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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