January 31, 2014 (Chinavestor) Some Chinese stocks continue to show strength despite an erratic stock market. Qihoo 360 Technologies (NYSE:QIHU) is one of these Chinese tech stocks that has managed to minimize damage lately. Another "good" looking stock is Shanda Games (NASDAQ:GAME) on the China ADR overbought monitor. But to see real stock extremes, you have to scroll down to the oversold end of the China stock universe.
Before we indulge on oversold stock extremes, let's take a closer look at those on the overbought list. Qihoo 360 Technology (NYSE:QIHU) is an interesting play. The stock hasn't reached theoretical highs but has been trading above its trading range for the last two weeks. While this si good news in general, this may become a liability should market sentiment turn negative. All told, investors have to exercise caution with Qihoo 360 Technology Co. (NYSE:QIHU).
Shanda Games (NASDAQ:GAME) and GigaMedia (NASDAQ:GIGM) are two much smaller, less liquid NASDAQ plays. Technical indicators don't work as well for these stocks.
If Qihoo 360 Tech (NYSE:QIHU) was an interesting stock on the overbought screen, it's 51job Inc. (NASDAQ:JOBS) as well as Sina Corp. (NASDAQ:SINA) that draw attention on the following screen. These two are on top of the oversold screen and for a good reason. As a matter of fact 51job Inc. (NASDAQ:JOBS) is so oversold that it is now trading at theoretical lows. This implies downside risk is not as big anymore.
Upside potential exceeds downside risk for Sina Corp. (NASDAQ:SINA) as well as for Baidu Inc. (NASDAQ:BIDU). These two are excellent trading stocks for they are highly liquid. Baidu Inc. (NASDAQ:BIDU) was extremely oversold just yesterday before the opening bell and thus her advance during the trading day was predictable. However it's a lot more difficult to tell what shares of Baidu Inc. (NASDAQ:BIDU)will do from here now that the stock is not overbought anymore.
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.