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CAAS, CHLN, SEED are overbought

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denial_1 March 22, 2012 (Chinavestor) There's been a lot of buzz with China Automotive Systems (NASDAQ:CAAS) lately but the stock is overbought and needs to take a breather right now. China Housing & Land Development (NASDAQ:CHLN) and Origin Agritech (NASDAQ:SEED) are on fire as well but these are considered overbought as well. Things look a little better for Shanda Games (NASDAQ:GAME), NetEase,.com (NASDAQ:NTES) and Focus Media Holdings (NASDAQ:FMCN) on the overbought chart below.

But investors have to consider that some of the overbought stocks have low quality trading characteristics, like China Housing & Land Development (NASDAQ:CHLN) and Origin Agritech (NASDAQ:SEED. But NetEase.com Inc. (NASDAQ:NTES) is a very liquid stocks with sound fundamentals and as such its technical reading is a lot more reliable.

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China Lodging Group (NASDAQ:HTHT) is nearing 52 week lows and is considered mildly oversold at the moment. Based on the size of the arrow, indicating an unusual bog drop, the stock is expected to find the bottom soon.

China Eastern Airlines (NYSE:CEA) is second on the top of the oversold chart. China's second largest airliner is hurt by high fuel prices but is not oversold at this moment. More downside looks possible for Thursday.

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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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