April 17, 2012 (Chinavestor) Don't be fooled by the extreme move of Feihe international (NYSE:ADY). The stock is a relative light weight when it comes to trading volume and market cap. Same is true for China Anghui Hold. (NYSE:KH). The overbought monitor works best for larger, liquid stocks like Baidu.com Inc. (NASDAQ:BIDU) or Youku.com Inc. (NYSE:YOKU). While these latter two are are far from being overbought, both are looking good on the monitor below.
Baidu.com Inc. (NASDAQ:BIDU) has been trading in a narrow range lately as the size of the arrow indicates. There is a lot of room left for a break out as the following chart displays.
Youku Inc. (NYSE:YOKU) has bottomed out lately. The stock is still trading close to the lower end of its trading range though.
Origin Agritech (NASDAQ:SEED) is oversold along with Qiao Xing Mobile (NYSE:QXM) and VisionChina Media (NASDAQ:VISN). These stocks may pop any time but that move is not guaranteed. China Eastern Airlines (NYSE:CEA) is the largest stock on the oversold list by marekt cap. There is more downside left despite recent losses. But investors have to consider that large socks don't get to the extreme oversold position before they turn around. So it may be a good time to buy into weakness when it comes to CEA.
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.