September 20, 2012 (Chinavestor) There is a long list of overbought Chinese stocks on Thursday. China Automotive Systems (NASDAQ:CAAS) is the one trading closest to theoretical highs. The stock advanced too much, too fast and as such is subject to a correction. Ctrip.com Inc. (NASDAQ:CTRP) is also in the danger zone along with Renren Inc. (NYSE:RENN), the Chinese version of Facebook (NASDAQ:FB). China Life Insurance (NYSE:LFC) is identical to RENN on the overbought monitor below. Chinese oil companies, Petrochina (NYSE:PTR) and CNOOC Ltd. (NYSE:CEO) made up a lot of ground but haven't approached theoretical highs yet.
there is no extremely oversold China stsock at the moment. The oversold monitor picked up the unusual decline of Chindex Int. (NASDAQ:CHDX) and Agria Corp. (NYSE:GRO), besides other stocks.
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.