September 16, 2011 (Chinavestor) Perfect World (NASDAQ:PWRD) became oversold after a 20% dive on Thursday. Online gamers fell along like Changyou.com Ltd. (NASDAQ:CYOU) and NetEase.com Inc. (NASDAQ:NTES). Sohu.com (NASDAQ:SOHU), the largest shareholder of Changyou.com (NASDAQ:CYOU) fell hard as well and appeared among the most 25 oversold China stocks. Besides online gamers, China solar stocks are hurting as is evidenced by the decline of JA Solar (NASDAQ:JASO), Trina Solar (NYSE:TSL) and Yingli Green Energy (NYSE:YGE). But while solar stocks are not oversold, Perfect World (NASDAQ:PWRD) is. Perfect World (NASDAQ:PWRD) has approached theoretical lows after a 20% tumble yesterday. A sharp decline from $17.3 to $13.9 in a day 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.
Changyou.com Ltd. (NASDAQ:CYOU) has been approaching theoretical lows but is not as oversold as PWRD. The same is true for Sohu.com Inc. (NASDAQ:SOHU), a stock whose direction looks uncertain at this time.
Chinese solar stocks have not bottomed out yet, according to the oversold chart below. Trina Solar (NYSE:TSL), JA Solar (NASDAQ:JASO) are trading below their trading evenelope but are not considered oversold yet. The same is true for Yingli Green Energy (NYSE:YGE). More downside looks possible for the sector at this point.
Falling online gamers hurt NetEase.com Inc. (NASDAQ:NTES), sending it off the overbought chart from yesterday. Sina Corp. (NASDAQ:SINA) lost some of its shine as well and Baidu.com Inc. (NASDAQ:BIDU) is off the chart, too.
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.