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Downside risk is up for HNP, FSIN, GSI

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decline November 16, 2011 (Chinavestor) There are four overbought stocks to watch today. Huaneng Power International (NYSE:HNP) is for one, followed closely by Fushi Copperweld (NASDAQ:FSIN), General Steel (NYSE:GSI) and ChinaCast Education (NASDAQ:CAST). Formerly overbought Linktone Ltd. (NASDAQ:LTON) and Nam Tai Electronics (NYSE:NTE) have pulled back. Stock of interest from the oversold screen is Ctrip.com Int. (NASDAQ:CTRP). The stock is oversold and is expected to make a comeback. Ku6 Media (NASDAQ:KUTV) is also a contender for a comeback.

Looking at the overbought screen first, it is obvious that Huaneng Power International (NYSE:HNP) is overbought. The stock reached theoretical highs after a 4.3% jump yesterday. The stock is ready for a correction right now.

Fushi Copperweld (NASDAQ:FSIN) is also a stock of concern, along with General Steel (NYSE:GSI). Both stock reached theoretical highs and are expected to pull back.

A technical correction looks timely for ChinaCast Education (NASDAQ:CAST) as well although the reason for the rally is different in here. The company received a buyout offer and might continue to go higher.

OB_20111116

Online travel site Ctrip.com Int. (NASDAQ:CTRP) fell too much, too hard, according to the oversold monitor. The stock is ready to make a sound comeback, if technical indicators prove right.

Ku6 Media (NASDAQ:KUTV) hasn't reached theoretical lows yet but is trading way below its trading range and may come back as well.

The rests of stocks on the screen are not oversold and thus have a lot more downside left.

OS_20111116

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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