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Internet stocks on the move

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internet_2 October 6, 2011 (Chinavestor) Chinese overbought and oversold indicators are in the midst of a transition period. The large number of oversold internet stocks no longer scare investors but their advance in the last two days was not enough to make them appear on the overbought screen. That said, some of the most important changes on the oversold screen is not what's in there but rather what's not in there today.

Prominent internet stocks moved off the oversold chart, Ctrip.com Int. (NASDAQ:CTRP) or Home Inns & Hotels Management (NASDAQ:HMIN). Others moved away from extreme positions, like like Baidu.com Inc. (NASDAQ:BIDU), NetEase.com (NASDAQ:NTES) or Sina Corp. (NASDAQ:SINA). That said, there are no extremely oversold China stocks left on Thursday.

Home Inns & Hotels Management (NASDAQ:HMIN) gave back some of earlier gains on Wednesday but thanks to a decisive rally on Tuesday, the stock is off the oversold chart.

Ctrip.com Int. (NASDAQ:CTRP) looks to have moved steadily off the bottom and is off the oversold chart as well.

Baidu.com Inc. (NASDAQ:BIDU) is looking ready to leave the "poor house" behind and reclaim the $120 level. NetEase.com Inc. (NASDAQ:NTES) and Sina Corp. (NASDAQ:SINA) are going to follow the market leader and are expected to outperform as well.

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There are no extremely overbought China stocks at the moment. Stocks with noticeable momentum include Harbin Electric (NASDAQ:HRBN), Sinopec (NYSE:SNP), Chindex Int. (NASDAQ:CHDX) and Actions Semi (NASDAQ:ACTS). All these stocks have upside potential left.

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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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