December 23, 2011 (Chinavestor) Explosive LDK Solar (NYSE:LDK) rocked the boat on Thursday again but is not considered overbought yet. Stocks with solid momentum on the overbought screen include Seaspan Corp. (NYSE:SSW), China XD Plastics (NASDAQ:CXDC), and Sinopec Corp. (NYSE:SNP). These stocks are trading above thier 50-DMA and 200-DMA as well. Huaneng Power Int. (NYSE:HNP)is supported by strong money flows.
There is not much surprise on the oversold chart today. Upside potential exceeds downside risk for Sina Corp. (NASDAQ:SINA) as well as for Baidu.com Inc. (NASDAQ:BIDU).
Back to the overbought screen. Chinese solar stocks have been extremely volatile in the past three months following the European sovereign debt crisis. Germany, Spain and Italy are the three largest export markets for Chinese PV makers and any economic trouble in those key markets is hurting top and bottom line. Suntech Power (NYSE:STP) is recovering the fastest and is getting to be overbought. But more upside is possible for the short run, according to the chart below.
Technical analysts like stocks that trade above their 50-DMA and 200-DMA at the same time. Not only have the following stocks solid momentum but are not considered overbought either. These are Seaspan Corp. (NYSE:SSW), China XD Plastics (NASDAQ:CXDC), and Sinopec Corp. (NYSE:SNP).
Huaneng Power International (NYSE:HNP), China's largest independent power generator, has been one of the best stock in November. But that was no surprise to those who follow money flows, for our chart foretold such a solid performance. Visit HNP enjoys strong money flows for details.
There are no oversold China stock extremes this morning. Baidu.com Inc. (NASDAQ:BIDU) is trading below its trading range after a lackluster performance on Thursday. China's internet giant is an explosive stock that can mover $10 a day easily. but technology stocks fell out of favor as investors cut back on risk. Sina Corp. (NASDAQ:SINA) is another technology play that fell on fear rather than on fundamentals.
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.