April 23, 2012 (Chinavestor) Unusual situation today. Large cap Guangshen Rail (NYSE:GSH) took the lead among overbought China stock this morning. China's railway operator in the Pearl river delta area has approached theoretical highs and is ready to pull back, according to the overbought chart. The stock rose 5.0% last week, a highly unusual move for this relatively low beta, low volatile stock. Melco Crown Entertainment (NASDAQ:MPEL) rose 9.1% last week but even that move is not so extraordinary for the stock. More upside is possible albeit that is subject to overall market conditions.
Shares of China Mobile (NYSE:CHL) are out of its trading range and while is not considered overbought, weak first quarter financials are likely to punish the stock.
Selected Chinese tech stocks look ready to advance. Qihoo 360 Technology (NYSE:QIHU) jumped last Thursday with heavy volume, a very posistive sign. The stock took a breather on Friday and is ready for more upside, according to the overbought chart.
NetEase.com Inc. (NASDAQ:NTES) has been leveling off under the $60 resistance level. It may take a strong market to move NTES above that level but once that happens, NetEase.com (NASDAQ:NTES) may not stop until $65 or more.
Spreadtrum Communications (NASDAQ:SPRD) is considered oversold. The stock has approached theoretical lows and may bottom out at current prices. China Grentech (NASDAQ:GRRF) stopped listing and is a fluke on the chart. Will be take out later today.
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.