June 4, 2012 (Chinavestor) It's time to find oversold and overbought stock extremes now that US markets calmed down. There are a lot more oversold stock extremes than overbought ones. Xinyuan Real Estate (NYSE:XIN) fell hard along with E Commerce China (NASDAQ:DANG) and eLong Inc. (NASDAQ:LONG).
When it comes to liquid stocks, investors should give China Mobile (NYSE:CHL), Melco Crown Entertainment (NASDAQ:MPEL), and China Telecom (NYSE:CHA) a second thought.
Chinese solar stocks haven't reached thoeretical lows yet, a bad news for long investors .
There are no overbought stock extremes among overbought stock according to the following chart. Stocks of interest include NetEase.com (NASDAQ:NTES), Silvercorp Metals (NYSE:SVM) and Youku.com Inc. (NYSE:YOKU). All these stocks have a lot more upside potential left.
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.