May 7, 2012 (Chinavestor) After a global sell-off, investors wonder what stocks are resilient and which ones are up for a sharp correction. New Oriental Education (NYSE:DU) is the most overbought China stock at the moment. The stock took a breather earlier last week and was ready to resume a rally up until Monday. The good news is that the stock is just slightly above its trading range and as such a correction will be limited. The same goes for China Mobile (NYSE:CHL), the largest Chinese mobile carrier. A correction is likely but will be minimal.
Changyou.com Ltd. (NASDAQ:CYOU) is hurting and while some other oversold stocks bounced back up, CYOU seems to be stuck. The stock fell on weak fundamentals and that is expected to continue to hurt. Investors should not expect a quick comeback.
More downside is possible for New Phoenix Media (NASDAQ:FENG) and for Vimicro Int. (NASDAQ:VIMC). None of these stocks have reached theoretical lows yet.
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.