February 19, 2014 (Chinavestor) The overbought China stock monitor picked up some unusual momentum of China Yuchai Int. (NYSE:CYD), Renren Inc. (NYSE:RENN), Chinadex International (NASDAQ:CHDX) and General Steel (NYSE:GSI). The monitor featured Qihoo 360 Technology (NYSE:QIHU) and Aluminum Crop. pf China (NYSE:ACH) in yesterday's report.
One of the most dramatic changes this technical indicator picked up comes from China Yuchai International (NYSE:CYD). This Chinese diesel engine maker will release earnings a week from today, February 26 on Wednesday, but a run up has already begun. The stock advanced as much as 13% this week alone. But pace of advance looks too much, too fast according to the overbought monitor. The stock is expected to take a breather before resuming such a steep stock price increase.
Renren Inc. (NYSE:RENN) surged 11.25% on Tuesday, the largest daily advance in 2014. Good news is that the advance came with large trading volume increase. Renren Inc. (NYSE:RENN) has an average trading volume of 1.7 million shares daily but on Tuesday over 5 million shares changed hands. Additionally, Reren Inc. (NYSE:RENN) is not considered overbought for two reasons. One, the stock price hasn't reached $3.9, a theoretical high price. Two, the size of the arrow, representing the pace of advance, is relatively modest. All told, more upside is possible for Renren Inc. (NYSE:RENN) before the opening bell.
Chindex Int. (NASDAQ:CHDX) looks similar to China Yuchai Intl. (NYSE:CYD) on the overbought screen. Both stock advanced too much, too fast and are subject to a technical correction. See size of the arrow for CYD and CHDX, both are alarmingly large compared to other stocks.
Technical reading of Qihoo 360 Technology (NYSE:QIHU) resembles to Renren Inc. (NYSE:RENN). Both stocks have been on the roll for the last two weeks and have advanced modestly. This implies more upside is possible for QIHU as well as for RENN.
Aluminum Corp. of China (NYSE:ACH) is very similar to Perfect World (NASDAQ:PWRD) on the overbought monitor below. None of these stocks are considered overbought. The arrow signals that both stocks have had some momentum but it is difficult to tell where they are going to go from here.
The main observation of the oversold China stock monitor is that there are no oversold Chinese stocks. Changyou.com Ltd. (NASDAQ:CYOU) , the only truly oversold China stock from last Friday, has advanced over 10% this week so far. Needless to say, Changyou.com Ltd. (NASDAQ:CYOU) is not considered oversold anymore. The stock price is now back where it was two weeks ago.
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.