January 13, 2012 (Chinavestor) There are a good number of extremely overbought China stock this morning. Vanceinfo Technologies (NYSE:VIT) is just as overbought as JA Solar Holdings (NASDAQ:JASO) or Hanwha Solarone (NASDAQ:HSOL). Larger solar maker Yingli Green Energy (NYSE:YGE) and Trina Solar (NYSE:TSL) are also in a tight spot right now. Renren Inc. (NYSE:RENN) and Tudou Holding (NASDAQ:TUDO) advanced the sharpest among internet stocks in the last two weeks and might experience a correction as a result. China Telecom (NYSE:CHA) and China Unicom (NYSE:CHU) were adversely effected by the market rally after both stocks experience heavy money outflows. China Unicom (NYSE:CHU) became oversold and is ready to make a comeback tough.
Back to the overbought screen. Chinese solar stocks had their best week in years after outlook for the industry improved. Industry leaders suffered 50%-80% losses of market value as European export market outlook worsened in all of 2011. But that made the sector attractive on valuation. Markets reacted with a buying binge after a successful Spanish and Italian bond auction this week calmed nerves concerning Europe's finances. JA Solar (NASDAQ:JASO) surged over 50% this week alone, no wonder the stock is overbought. Hanwha Solarone (NASDAQ:HSOL) surged a staggering 75% since Monday! But advances were not limited to small players; industry leader Yingli Green Energy (NYSE:YGE) rose over 30%. Another bellwether for the industry, Trina Solar (NYSE:TSL, advanced 47.2% since Monday. These stocks were not driven by technicals, suggesting the overbought monitor is of a lesser use, nevertheless is showing the red hot sector as it is.
Similarly to the solar sector, internet stock caught fire this week. Sina Corp. (NASDAQ:SINA) surged 25% since Monday, its best weekly performance in the last three months. Smaller cap more volatile stocks stole the story though, just like in the solar sector. Renren Inc. (NYSE:RENN) and Tudou Holding (NASDAQ:TUDO)advanced over 15% since Monday, a highly unusual move after a year of significant losses in 2011. The good news is that more upside is possible, according to the overbought monitor.
But advances were not limited to solar or interent stock only as the following chart testifies.
China Unicom (NYSE:CHU) fell just shy of 10% since Monday and is oversold. China Telecom (NYSE:CHA) is also a stock that has more upside potential than downside risk. But investors seem to prefer riskier, high return stocks hampering the short term outlook for the sector.
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.