March 29, 2012 (Chinavestor) The overbought monitor is used most often before the market open. This is the time for investors to find stocks that are trading at extremes and offer quick profits. But another way to look at overbought monitor is trying to find stocks that are resilient in a falling market. The Dow Jones Industrial Average (INDEXDJX:.DJI) has fallen for three days in a row with no clear end to the slide on sight. Stocks that have weathered the storm well include Mindray Medical (NYSE:MR), Shanda Games (NASDAQ:GAME) and NetEase.com Inc. (NASDAQ:NTES). Technology giant Baidu.com Inc. (NASDAQ:BIDU) is looking good as well albeit the stock looks more vulnerable at this point. Assuming there is not going to be any stock specific news coming out for these stocks, they may continue to outperform the broad market. But momentum has dried up for 51job Inc. (NASDAQ:JOBS) as well as for Giant Interactive (NYSE:GA) or Yucheng Tech (NASDAQ:YTEC).
Another stock of stocks are the oversold ones.They are the ones that tend to recover FAST when the stock market turns around. China Eastern Airlines (NYSE:CEA) is one contender and is a good buy at $16 or under. Petrochina Co. Ltd. (NYSE:PTR) and Huaneng Power (NYSE:HNP) are also ripe for bottom fishing, according to the oversold monitor below.
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.