March 6, 2014 (Chinavestor) The overbought China stock monitor picked up a good number of important developments. First of all, E Commerce China Dangdang Inc. (NASDAQ:DANG) became extremely overbought after a 73% rally in the past 5 trading days! Perfect World Co. (NASDAQ:PWRD), Renren Inc. (NYSE:RENN), Sutor Technology (NASDAQ:SUTR) as well as Sohu.com Inc. (NASDAQ:SOHU) are stocks screaming on the overbought screen. SouFun Holdings (NYSE:SFUN) is also extremely overbought. And while the overbought chart is full of action, no oversold China stock exists at this moment.
Taking a closer look at the overbought China stock monitor, E Commerce China Dangdang Inc. (NASDAQ:DNAG) is far out there. The stock surged from the middle of its trading range to all the way to theoretical highs. Needless to say, the stock is extremely overbought. This implies DANG is expected to level off or fall slightly on Thursday and Friday before resuming a rally.
Perfect World (NASDAQ:PWRD) is another stock on fire. PWRD surged on Wednesday and is up 10% for the last three days as a result. Perfect World (NASDAQ:PWRD) leveled off on Thursday and may continue to advance on Friday or Monday.
Renren Inc. (NYSE:RENN) is up over 30% for the week and is overbought. Good news is that RENN surged the most on Wednesday with volume four times over average. This is very important because it shows strong money flows are present. This makes RENN less vulnerable to downside pressure.
Sohu.com Inc. (NASDAQ:SOHU), the most overbought China stock just earlier the week, has leveled off for the last three days. The stock is far from theoretical highs but is lacking momentum at this point. The overbought chart doesn't tell where SOHU is going to go from here. One thing looks certain: downside pressure is minimal right now.
SouFun Holdings (NYSE:SFUN) is another China stock on fire. The stock surged the most among major Chinese listings on Wednesday and is now extremely overbought.
This chart clearly shows Soufun Holdings (NYSE:SFUN) is now extremley overbought bacause it is now trading over two standard deviation above its trading range.
There are no oversold Chinese stocks at this moment. Chinese education stocks have leveled off just like China Telecom (NYSE:CHA) did. Mindray Medical (NYSE:MR) slid on Wednesday but is not considered oversold yet.
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.