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China stock extremes for Oct. 26

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worry_1 October 26, 2011 (Chinavestor) Overbought stocks took a breather on Tuesday and are ready to resume the rally, unless negative market sentiment snarls markets. Silvercorp Metals (NYSE:SVM) and Spreadtrum Communications (NASDAQ:SPRD) are looking good on the overbought screen but downside risk exceeds upside potential for China Automotive Systems (NASDAQ:CAAS). Telestone Technologies (NASDAQ:TSTC) is coming up on the screen with more potential upside ahead. Ctrip.com Int. (NASDAQ:CTRP) and Changyou.com Lyt.d (NASDAQ:CYOU) are some of the most liquid stocks of interest on the oversold screen today.

Back to the overbought screen. China Automotive Systems (NASADAQ:CAAS) is overbought to the extremes and is ready to fall back or take a breather. The stock reached theoretical highs and is trading well above its trading envelope.

And while Silvercorp Metals (NYSE:SVM) and Spreadtrum Communications (NASDAQ:SPRD) trade above their trading envelopes as well, more upside is possible for their current prices are not extremes yet.

Far from overbought, Telestone Corp. (NASDAQ:TSTC) made significant inroads to the screen and is worth paying attention to. The good news is that more upside is possible for the stock despite a 23% run in the last five days.

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Ctrip.com Int. (NASDAQ:CTRP) is aon the oversold scren, to the surprise of many. The company is going to report earnings on November 13, after the market close. Chances are that the company will make a run-up before earnings, should market sentiment improve.

Another liquid NASDAQ stocks, Changyou.com Ltd (NASDAQ:CYOU) has been on the oversold screen for the longest time. The stock is not oversold and offers upside potential more than downside, at this point.

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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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