June 6, 2012 (Chinavestor) Investors have to realize that there are no overbought China stocks at the moment despite recent advances. Huaneng Power Int. (NYSE:HNP) and Kong Zhong Corp. (NASDAQ:KONG) haven't reached theoretical highs yet. Jiayuan.com (NASDAQ:DATE) and Spreadtrum Communications (NASDAQ:SPRD) cleared a lot of ground lately but are just trading at the high end of their trading envelope. More upside is very possible for both stocks. Chinese airliners, China Southern Airlines (NYSE:ZNH) and China Eastern Airlines (NYSE:CEA) made a remarkable comeback as well.
There isn't much change on the oversold screen from yesterday. eLong Inc. (NASDAQ:LONG) and Xinyuan Real Estate (NYSE:XIN) continue to hug theoretical lows. This suggests both stocks have bottomed out and chances are that both will make some sort of a comeback.
Asia, SSRX, CNHR, SCRD, ATV have all fallen too hard, too much as well.
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.