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China small caps: momentum is back

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advance2 October 17, 2011 (Chinavestor) There are no large cap stocks among the most overbought China stocks other than China Life Insurance (NYSE:LFC) and HSBC Plc. (NYSE:HBC). Zhongpin Inc. (NASDAA:HOGS), GigaMedia Ltd. (NASDAQ:GIGM), Chinxed Int. (NASDAQ:CHDX) and China Transingo technologies (NASDAQ:CTFO) has outstanding momentum, something that may come handy when the market itself has momentum. Qihoo 360 Technologies (NYSE:QIHU) is the first Internet stock on the overbought list. Vanceinfo Tech. (NYSE:VIT) soared 35% last week but the rally hasn't been exhausted yet. There isn't much to see as far as the oversold end of the market is concerned.

Zhongpin Inc. (NASDAQ:HOGS) has momentum but that is accompanies with strong money flows. Chinese consumer non-cyclical comeback This in turn suggests the stock has nor upside potential left. Stock price for Chindex International (NASDAQ:CHDX) and China Transinfo Tech. (NASDAQ:CTFO) swung back from under the trading envelope to the high end of it. More upside is highly likely.

China Life Insurance (NYSE:LFC) surged 13% last week, a highly unusual advance for a large cap stock. The good news is that upside is not limited by technical despite the rally.

Internet stocks oared last Friday following Google's blockbuster results. Qihoo 360 Technologies (NYSE:QIHU) is the first technology stock to appear on the overbought screen, with more to follow... Sina Corp. (NASDAQ:SINA), Baidu.com Inc. (NASDAQ:BIDU), NetEase.com Inc. (NASDAQ:NTES) has a chance to shine.

Vanceinfo Technologies (NYSE:VIT) is also among the most overbought China stocks but is not overbought to the extremes! More upside is possible on Monday.

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U.S. indices recovered last week, leaving little food for thought on the oversold end of the China stock universe. There is not much to see except for the fall of CDC Corp. (NASDAQ:CHINA) or China Sky One Medical (NASDAQ:CSKI) - both stock has plenty of downside 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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