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Tech rally not exhausted yet

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advance5 October 11, 2011 (Chinavestor) China Life Insurance (NYSE:LFC) bumped to the top of the overbought indicator on Tuesday.  Other large cap stocks on the move include CNOOC Ltd. (NYSE:CEO) and HSBC Plc. (NYSE:HBC). Technology stocks bounced off oversold chart except for Sina Corp. (NASDAQ:SINA). Youku.com (NYSE:YOKU) and Changyou.com Ltd. (NASDAQ:CYOU) rocked the boat on Monday and are off the oversold screen. Despite sizable advances, most Internet stocks are off the overbought chart for they are coming off way below. More upside is possible for Baidu.com Inc. (NASDAQ:BIDU). But investors keep risk at bay for smaller volatile stocks failed to move. China Green Agriculture (NYSE:CGA) or China Automotive Systems (NASDAQ:CAAS) failed to gain traction on Monday.

Most of the advance was confined to a few sectors on Monday. Transport, tech, and financial stocks lead - we wrote late Monday. China Life Insurance (NYSE:LFC) was responsible for most of the move on Monday albeit a 3.6% advance from HSBC Plc. (NYSE:HBC) was also welcome news to financials. Despite some advances, none of these stocks are overbought.

CNOOC ltd. (NYSE:CEO), China's offshore oil driller, rose on firm oil prices. The stock jumped $13.67 in just one day but is far from overbought!

Chinese Internet stocks continued to show strength. Youku.com (NYSE:YOKU) surged 25% in the last five days alone! Sohu's online game partner, Changyou.com Ltd. (NASDAQ:CYOU), is also off to a great start in October. Changyou.com Ltd. (NASDAQ:CYOU) was oversold as late as Monday morning and was on our watch list for the week. CYOU on a roll.

Industry leader Baidu.com Inc. (NASDAQ:BIDU) closed 4.47% higher for the day, lifting the rest of the industry.

 

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But Sina Corp. (NASDAQ:SINA) is still on the oversold chart. The stock rose 4.50% on Monday but lags the rest of the industry. More upside is certainly a possibility for China's second most visited website operator.

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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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