November 19, 2012 (Chinavestor) WuXi Pharmatech (NYSE:WX) is trading closest to theoretical highs on Monday, according to the overbought chart. But the number of overbought China stocks is limited after last week's market correction. Stocks with momentum include 51job Inc. (NASDAQ:JOBS) and New Oriental Education (NYSE:EDU) in addition.
For stock extremes, investors have to look at the oversold chart on bottom of page.
Sina Corp. (NASDAQ:SINA) fell almost ten points on Friday after a disappointing third quarter report. The company issued guidance below estimate and took a big hit. The stock is not oversold to the extremes for it hasn't reached theoretical lows yet. More downside is possible, according to the following chart.
NetEase.com Inbc. (NASDAQ:NTES) fell 20% last week and is oversold due to the large size of the arrow. This implies the stock fell too much, too fast. Same is true for Spreadtrum Communications (NASDAQ:SPRD). Developments don't look too good for Baidu.com Inc. (NASDAQ:BIDU) either, China's interent search giant is not considered oversold at this time.
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.