It wasn't just the 4% surge on Thursday that sent shares of Youku.com inc. (NYSE:YOKU) to an extreme overbought position. The stock advanced over 30% in the last five trading days, making it susceptible to profit taking on Friday or early next week.
Smaller cap, volatile Cogo Group (NASDAQ:COGO), American Oriental (NYSE:AOB), and China Housing and Land Development (NASDAQ:CHLN) are additional stocks with limited upside potential at the moment.
Huaneng Power Int. (NYSE:HNP), China's largest independent power producer, is also in the danger zone. Downside risk exceeds upside potential for this stock on Friday.
China Unicom (NYSE:CHU), the second largest Chinese mobile carrier, is extremely oversold as the following chart testifies. The stock surged 40% last year, the most among large cap Chinese ADRs, and was susceptible to a pull back. But the current fall seems to be too much, too fast.
China Telecom (NYSE:CHA) jumped 2.42% on Thursday and is off extreme oversold position.
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.