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China stock extremes on Sept 19

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eye September 19, 2011 (Chinavestor) China Green Agriculture (NYSE:CGA) and Gushan Environmental Energy (NYSE:GU) are the two overbought China stocks today. Chances are that they will take a break on Monday. Despite recent losses, Changyou.com Ltd. (NASDAQ:CYOU) and Perfect World (NASDAQ:PWRD) are not oversold yet. Weakness of the sector is not limited to these smaller players, NetEase.com Inc. (NASDAQ:NTES) is also among the 25 most oversold China stocks at the moment. Sohu.com Inc. (NASDAQ:SOHU), Changyou's largest shareholder, is also on the list today. Besides online gamers, solar stocks feel a cool off. JA Solar (NASDAQ:JASO), Trina Solar (NYSE:TSL) and Yingli Green Energy (NYSE:YGE) among stocks to watch on Monday.

Most of the action is taking place on the oversold end of the China stock universe. Trading stock Melco Crown Entertainment (NASDAQ:MPEL) is trading closest to theoretical lows but hasn't reached theoretical lows yet. This implies more downside is possible.

Changyou.com Ltd. (NASDAQ:CYOU) isn't out of the woods yet either. The stock has been trading in a narrow range with no signs of a break out. Sohu.com Inc. (NASDAQ:SOHU), former parent of Changyou, is among the 25 most oversold China stocks. But again, Sohu.com Inc. (NASDAQ:SOHU) is far from extreme oversold position leaving room to the downside.

Perfect World (NASDAQ:PWRD) fell hard last week after lowering third quarter revenue guidance. Despite a 25% fall last week, the stock is not oversold yet!

NetEase.com Inc. (NASDAQ:NTES), the largest Chinese online game operator, is also on the list as the following chart testifies. NetEase.com Inc. (NASDAQ:NTES) is not oversold but is trading at the low end of its trading envelope. The oversold indicator is neutral and doesn't signal a quick turnaround at this point.

The oversold chart dashed hopes that the solar sector has bottomed out. Neither JA Solar (NASDAQ:JASO), Trina Solar (NYSE:TSL) or Yingli Green Energy (NYSE:YGE) are oversold despite disappointing performances in August. More downside is possible, if the oversold chart was right.

OS_2011919

Small cap China stocks are on top of the overbought chart. China Greeen Agriculture (NYSE:CGA) rose over 16% to $6 last Friday but is now overbought. Downside risk exceeds upside potential.

OB_2011919

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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