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EJ, CHU, JOBS... oversold

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bull_bear3 May 17, 2012 (Chinavestor) Spreadtrum Communications (NASDAQ:SPRD), a China stock with the most momentum on yesterday's overbought screen, dived 7.15% that day. That move leaves the overbought screen boring with no stock extremes to look at. But the oversold end of the China stock universe makes up for a loos of action on the OB screen. Handpicking a few stocks of interest from the second chart of this page: China Unicom (NYSE:CHU), E-House Holdings (NYSE:EJ), and 51job Inc. (NASDAQ:JOBS). Scroll down for more info.

OB_20120517

Jiayuan.com (NASDAQ:DATE) is trading closest to theoretical lows among Chinese ADRs on Thursday. The stock fell 13.28% in the last five trading days ahead of earnings report on May 23. Yet that's nothing in comparison to Ambo Education Hold.'s (NYSE:AMBO) 31.82% dive on the same time. Both stocks are oversold and may bounce back before releasing earnings. But AMBO will have a harder time to make a comeback for its been postponing a release of its earnings for twice this month. That shook investors confidence for this has been a standard procedure of eventual delisting for numerous Chinese companies. Related story: Chart of the day: AMBO.

51job Inc. (NASDAQ:JOBS) is also oversold according to the chart below. Given that its quarterly report was not as bad, chances are that JOBS will make a comeback, similar to that of Sina Cirp. (NASDAQ:SINA) on Wednesday. Shares of SINA Corp. (NASDAQ:SINA) surged 11.9% yesterday on a strong Q1 report.

China Unicom (NYSE:CHU) is ovesold as well. Experience has taught us that large cap companies like CHU don't get ovedrsold to the extremes before turning around.

OS_20120517

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.

aa_OBOS_expl_2weeks


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