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Stock extremes at the end of October

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money_3 October 31, 2011 (Chinavestor) A ten percent jump last week was enough for HSBC Plc. (NYSE:HBC) to get extremely overbought. China Real Estate (NASDAQ:CRIC) is another stock trading at extremes. Downside risk exceeds upside potential for China Life Insurance (NYSE:LFC) and AirMedia Group (NASDAQ:AMCN) as well. But Silvercorp Metals (NYSE:SVM) and Spreadtrum Communications (NASDAQ:SPRD), Vanceinfo Technologies (NYSE:VIT) as well as large cap Petrochina Co. (NYSE:PTR) can get some more love, according to the overbought screen. Changyou.com Ltd. (NASDAQ:CYOU) was neutral before earnings announcement but is trading lower on pre-market. Sina Corp. (NASDAQ:SINA) is trading close enough to theoretical lows to show up on the oversold screen albeit the stock is far from being oversold. It's going to be earnings from Sohu.com Inc. (NASDAQ:SOHU) and Changyou.com Ltd. (NASDAQ:CYOU) that will determine direction for the sector. Baidu's record earnings last Friday lifted sentiment but Sohu's numbers cool expectations.

Taking a closer look at the overbought screen, HSBC plc. (NYSE:HBC) and China Real Estate Corp. (NASDAQ:CRIC) are truly overbought. E-House Holdings (NYSE:EJ) caught fire last week as well and is trading at extremes. Chinese real estate stocks got a boost after China Vanke (SHE:200002), the largest property developer in the country, reported record earnings last week. But the rally might loose some of its shine for selected real estate stocks advanced too much, too fast.

A ten percent jump for large cap, low beta HSBC plc. (NYSE:HBC) was enough to send it to trading extremes. Chances are that the stock will pull back to take a breather before being able to climb higher.

Silvercorp Metals (NYSE:SVM) enjoyed a basic material rally and might extend it, should market sentiment improve. Spreadtrum Communications (NASDAQ:SPRD) and Vanceinfo Technologies (NYSE:VIT) are very similar to SVM from a technical point of view.

Energy stocks rallied last week but more upside is possible, according to the overbought monitor's reading on Petrochina Co. Ltd. (NYSE:PTR). It doesn't mean Petrochina Co. Ltd. (NYSE:PTR) is poised to advance but that it has room left to the upside.

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Tech stocks rallied last week after Baidu.com Inc. (NASDAQ:BIDU) reported blockbuster third quarter financials last week. Sohu.com inc. (NASDAQ:SOHU) and Changyou.com Inc. (NASDAQ:CYOU) are next on the earnings calendar on Monday morning. None of them are trading at extremes and might go either way, according to the oversold chart. Sina Corp. (NASDAQ:SINA) is also on the oversold screen but it's due to a lack of momentum and not that is got oversold to extremes.

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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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