April 1, 2014 (Chinavestor) Chinese stocks lacked discipline in March. Most Chinese stocks fell hard, led by the tech sector, but some of the banner stocks ended the month on a high note.
Ctrip.com Inc. (NASDAQ:CTRP), Baidu Inc. (NASDAQ:BIDU) and Sina Corp. (NASDAQ:SINA) may have ended March on a high note, yet their performance of the month was more than disappointing. Interestingly, Petrochina Co. Ltd. (NYSE:PTR) fell the most among major Chinese listings on the last trading day in March yet this stock advanced 2.75% in March. NetEase Inc. (NASDAQ:NTES) is the same as PTR. Poor showing on Monday but an overall strength for the month.
When it comes to stock extremes, the oversold chart is worth paying attention to. 51job Inc. (NASDAQ:JOBS) may be trading closest to theoretical lows but is not considered oversold yet. The stock hasn't reached extreme OS price point yet.
Sohu.com Inc. (NASDAQ:SOHU), SouFun Holdings (NYSE:SFUN) as well as Ku6 Media (NASDAQ:KUTV) fell hard and are just as close to extreme position as JOBS. Again, none of these stocks have reached theoretical lows, thus are not considered oversold. Current decline is part of an overall weakness only. Immediate turn around is not granted, according to the following chart.
When it comes to overbought Chinese stocks, China Housing & Land Development (NASDAQ:CHLN) sticks out. This stock is extremely overbought but investors have to realize that CHLN is a low market cap, low trading volume stock and is unfit for technical analysis.
Huaneng Power Intl. (NYSE:HNP) is the first "real" stock on the overbought screen but as is shown, HNP is not considered overbought.
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.