January 10, 2014 (Chinavestor) Looking for Chinese stocks on the move? Look no further. The China ADR overbought indicator tells you a list of Chinese stocks that are trading out of their trading envelope. Perfect World (NASDAQ:PWRD) is one of them but so is Telestone Tech (NASDAQ:TSTC) and Melco Crown Ent. (NASDAQ:MPEL). But here is the trick. Technical indicators work best for liquid, higher volume stocks. So forget TSTC for now...
But see the list of other Chinese ADRs with momentum here.
When it comes to oversold Chinese stocks, Ctrip.com Int. (NASDAQ:CTRP) is one of them. So is China Unicom (NYSE:CHU) and Yanzhou Coal (NYSE:YZC). The difference between YZC and those other two is that Yanzhou Coal (NYSE:YZC) hasn't reached theoretical lows yet. This suggests downside risk is still present. But upside potential exceeds downside risk for Ctrip.com Int. (NASDAQ:CTRP) as well as for China Unicom (NYSE:CHU).
China Mobile (NYSE:CHL), another mobile operator from China, has had a tough ride according to the following screen.
Chinese oil companies fared a little better. Petrochina Co. Ltd. (NYSE:PTR) is on the slide but the decline hasn't been all that dramatic. The same goes for China's largest oil refiner, Sinopec Corp. (NYSE:SNP). See chart below for details.
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.