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Internet, airline stocks get oversold!

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buy_icon September 22, 2011 (Chinavestor) Sohu.com Inc. (NASDAQ:SOHU) is oversold along with China Southern Airlines (NYSE:ZNH) and Melco Crown Entertainment (NASDAQ:MPEL). Stocks with significant drop include NetEase.com Inc. (NASDAQ:NTES), China Eastern Airlines (NYSE:CEA) and Perfect World (NASDAQ:PWRD), as the oversold chart testifies.  Ctrip.com Inc. (NASDAQ:CTRP) fell along industry lines but is not oversold yet. The overbought end of the China stock universe lacks action except for surprise stock, Shanda Interactive (NASDAQ:SNDA). Investors wonder where the bottom might be for Sohu.com Inc. (NASDAQ:SOHU), one of the most visited Chinese websites. Shares of the company fell from over $90 at the end of July to just $60, making investors nervous. But the stock is bout to hit bottom according to the oversold chart. The stock reached theoretical lows plus fell hard lately, limiting its downside risk.

Upside potential exceed downside risk for China Southern Airlines (NYSE:ZNH) and China Eastern Airlines (NYSE:CEA). China's second largest airliner, China Eastern Airlines (NYSE:CEA) fell to 52 week lows and looks good on valuation. The sudden drop of China Southern Airlines (NYSE:ZNH) calls for a correction as well. Both stocks have bottomed out suggests the technical chart below.

Melco Crown Entertainment (NASDAQ:MPEL) is a volatile stock that does well when market sentiment is strong. The case has been just the opposite lately, hurting the stock, but that may change. One thing is for sure: Melco Crown Entertainment (NASDAQ:MPEL) is ready to jump.

China's leading online gamer, NetEase.com Inc. (NASDAQ:NTES), is also among the most oversold China stocks. NetEase.com Inc. (NASDAQ:NTES) is not so oversold as Sohu.com Inc. (NASDAQ:SOHU) but has limited downside as well. Investors got nervous about Chinese internet and online game stocks after Perfect World (NASDAQ:PWRD) lowered third quarter revenue guidance and Sina Corp. (NASDAQ:SINA) started to censor its Weibo.com service.

Ctrip.com Inc. (NASDAQ:CTRP) was hanging on to previous gains the best among major online companies up until lately. But the stock couldn't fight the market and fell another 10% on the week. Again, should market sentiment improve, Ctrip.com Inc. (NASDAQ:CTRP) has a chance to do well.

OS_2011922

There is not much to see on the overbought end of the China stock universe. None of the stock we follow are trading at extreme overbought positions today. Shanda Interactive (NASDAQ:SNDA) came out strong despite market woes, something investors want to pay attention to.

OB_2011922

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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