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Oversold HNP has a chance to shine

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shine3 October 19, 2011 (Chinavestor) Risky small caps continue to dominate the overbought chart today. Zhongpin Inc. (NASDAQ:HOGS) is in dangerous territory but more upside is possible. Smaller stocks with noticeable momentum include China Automotive Systems (NASDAQ:CAAS), Chindex Int. (NASDAQ:CHDX), China Transinfo Tech (NASDAQ:CTFO), Vimicro International (NASDAQ:VIMC). Petrochina Co. Ltd. (NYSE:PTR) has recovered but China Life Insurance (NYSE:LFC) lost some of its shine. Liquid stocks of interest in the oversold screen include Ctrip.com Int. (NASDAQ:CTRP) and Huaneng Power (NYSE:HNP).

Back to the overbought screen. Zhongpin Inc. (NASDAQ:HOGS) has leveled off for the week but remains in a tight spot. There is room left to the upside for the stock hasn't reached theoretical high yet. But when market sentiment is fast changing, it's better be safe than sorry.

Smaller China Automotive Systems (NASDAQ:CAAS) is catching up with yesterday's overbought players like Chindex International (NASDAQ:CHDX). But lower volume renders technical indicators for this group of stocks less accurate.

Petrochina Co. Ltd. (NYSE:PTR) has recovered but China Life Insurance (NYSE:LFC) advanced 3.8% on Tuesaday and that advance is showing on the overbought screen. Index heavy weight stocks don't fight the market rather define the market. That said upside for PTR is depending on market sentiment.

China Life Insurance (NYSE:LFC) has lost its shine lately. Additional upside is possible but is unlikely, according to the overbought chart.

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Noah Education Hold. (NYSE:NED) is the most oversold stock again. Industry leader New Oriental Education (NYSE:EDU) fell hard after releasing quarterly earnings, sinking the rest of the sector.

Ctrip.com Int. (NASDAQ:CTRP) fell after a Piper Jeffrey analyst downgraded the stock to neutral. The stock is obviously not oversold but rather is sensitive to negative news when investors sentiment is uncertain.

Huaneng Power (NYSE:HNP) is also among the 25 most oversold China stocks but is doesn't mean it will go lower on Wednesday. In fact there is a lot of room left to the upside, given that H-shares of HNP were on fire in Hong Kong earlier today.

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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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