February 26, 2014 (Chinavestor) The China stock monitor picked up a few momentum stocks for today. Among them are Chindex International (NASDAQ:CHDX), Qihoo 360 Technologies (NYSE:QIHO) and WuXi Pharma (NYSE:WX). Home Inns & Hotels Management (NASDAQ:HMIN) was the best China play yesterday by far and is not overbought yet. 51job Inc. (NASDAQ:JOBS), Baidu Inc. (NASDAQ:BIDU) as well as oil major Petrochina (NYSE:PTR) and CNOOC Ltd. (NYSE:CEO) showed weakness. The last few weeks were not a cake walk for most Chinese stocks. Sina Corp. (NASDAQ:SINA) is the latest casualty and the stock is now trading below important support levels. The oversold monitor picked up stocks of interest such as eLong Inc. (NASDAQ:LONG), SouFun Holdings (NYSE:SFUN), NetEase Inc. (NASDAQ:NTES), and China Telecom (NYSE:CHA), among others.
The first chart is a list of the most overbought Chinese stocks today. The definition of overbought is this. Overbought is 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.
With that knowledge we understand that there are no overbought Chinese stocks today. Acorn Int. (NYSE:ATV) is a low trading volume, low market cap stock that is irrelevant for the overbought monitor. Let's just omit that. The first real trading stock for today is Chindex International (NASDAQ:CHDX). Despite recent advance, the stock is not considered overbought. Current stock price is far from theoretical highs as the following chart testifies.
Pace of advance looks sustainable for Qihoo 360 Technologies (NYSE:QIHU), one of the best performing Chinese stocks in 2013-2014. While QIHU rose 30% YTD, outlook remains rosy from a technical point of view.
WuXi Pharmatech (NYSE:WX) has had a fantastic February so far. Good news is that the stock is still not overbought despite a 15.8% advance since February 1st.
To find stock extremes, investors have to venture to the oversold monitor below. Oversold is 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.
eLong Inc. (NASDAQ:LONG), Sutor Technology (NASDAQ:SUTR) fell to theoretical lows and are considered oversold. However technical indicators work best for stocks that have ample trading volume. This is not the case for either LONG and SUTR. Price devlopment is not as dramatic for SouFun Holdings (NYSE:SFUN) but current stock price is extremly close to theoretical lows. But the pace of decline looks steady and thus more downside is possible.
NetEase Inc. (NASDAQ:NTES) is clearly on the fall but again, is still far from theoretical lows. Downside risk persists for NTES as a result.
China Telecom (NYSE:CHA) fell from the middle of its trading range to well below it. But CHA hasn't approached theoretical lows either. The stock can continue to slide, according to the following chart.
While the overbought and oversold monitor looks at price movments for the last two weeks, it is importnat to see hot stocks of the day. Home Inns & Hotels Management (NASDAQ:HMIN) jumped three times more than any other China play just yesterday.
To find bog movers, investors have to scroll to the second part of the follwoing chart. Sina Corp. (NASDAQ:SINA) fell $7.1 or 9.3%!!! It is not only the largest decline for the stock in 2014 but the worst decline among any other Chinese stock by far. Sina (NASDAQ:SINA) report earnings yesterday and outlook for its Weibo IPO and its effect on the stock was devastating. 51job Inc. (NASDAQ:JOBS) and Baidu Inc. (NASDAQ:BIDU) followed SINA from a safe distance.
Chinese oil companies fell hard, again. Sinopec (NYSE:SNP0, CNOOC Ltd. (NYSE:CEO) as well as China's largest oil producer Petrochina Co. Ltd. (NYSE:PTR) were among the hardest hit Chinese stocks. China Telecom (NYSE:CHA), a not yet oversold sstock, fell in between SNP and NTES.
The decline from Sina Corp. (NASDAQ:SINA) is very dramatic on the chart above. What the 9.3% decline meant for the stock is even worse. Sina Corp. (NASDAQ:SINA) fell below its 200-DMA as well as below its short term support line, the 50-DMA for the first time since June 2013. See chart below for details.