April 2, 2012 (Chinavestor) The good news is that there are no overbought Chinese stocks at the beginning of April. This gives upside potential for momentum stocks such as China Mobile (NYSE:CHL) and Mindray Medical (NYSE:MR). NASDAQ listed larger stocks with momentum include NetEase.com (NASDAQ:NTES) and Baidu.com (NASDAQ:BIDU).
Smaller, more volatile Chinese stocks are looking good as well, at least from a technical point of view. China XD Plastics (NASDAQ:CXDC) and China Housing & Land Development (NASDAQ:CHLN) took a breather last Friday, as expected. See CHLN, CXDC are too hot. Simcere Pharma (NYSE:SCR) has been creeping higher and is looking good on the overbought monitor. But China BAK Battery (NASDAQ:CBAK) looks to reach a summit earlier last week with more downside risk going forward.
Telestone Technologies (NASDAQ:TSTC) fell last Friday on disappointing 2011 financials. Despite a significant dive, more downside is possible, according to the oversold monitor.
Weak financials continue to hurt China Lodging Group (NASDAQ:HTHT) while Fushi Copperweld (NASDAQ:FSIN) continues to ride in a roller-coaster pattern. Given that none of these have stocks reached theoretical lows, more downside is a real possibility.
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.