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More upside for ACH, ZNH, SOHU

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advance3 January 26, 2012 (Chinavestor) Despite extreme overbought position, the rally may not be over for Aluminum Corp. of China (NYSE:ACH). But smaller cap, less fundamentally driven rally of WuXi Pharma (NYSE:WX) or China Green Agriculture (NYSE:CGA) puts these stocks in jeopardy, according to the following chart. Sohu.com Inc. (NASDAQ:SOHU) made a remarkable recovery albeit more upside is possible. For more overbought stocks, see chart below. When it comes to oversold stocks, investors should check with China Unicom (NYSE:CHU), China Southern Airlines (NYSE:ZNH) and China XD Plastics (NASDAQ:CXDC).

Back to the overbought screen. Aluminum Corp. of China (NYSE:ACH) advanced on a FED instilled rally, promising rates to stay low late into 2014. Chinese resource stocks advanced the most in Hong Kong on the news, giving China's largest aluminum maker a boost despite an extreme technical showing on the overbought screen.

But investors have to excercise caution with stocks like WuXi Pharma (NYSE:WX) or China Green Agriculture (NYSE:CGA). These stocks are overbought with no fundamental bascking for such a rally.

Chinese internet stocks will start reporting quarterly earning soon, with Sohu.com Inc. (NASDAQ:SOHU) on the forefront. Expect a broad internet rally should earnings from SOHU beat expectations. NetEase.com Inc. (NASDAQ:NTES), on the bottom of the overbought chart, is coming up along with the rest of the sector. Good size upside potential is here...

OB_20120126

China Unicom (NYSE:CHU), China Southern Airlines (NYSE:ZNH) and China XD Plastics (NASDAQ:CXDC) are stocks of interest on the oversold chart. China Unicom (NYSE:CHU) pulled back from extreme oversold position. There is a lot more room left to the upside.

China Southern Airlines (NYSE:ZNH), while far from theoretical lows, is ready for a comeback as well. The stock fell too hard, too fast, according to the oversold chart below. The same is true for China XD Plastics (NASDAQ:CXDC).

OS_20120126

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.

aa_OBOS_expl_2weeks


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