April 3, 2014 (Chinavestor) Now that the stock market got back its mojo, Chinese stocks started to move. The number of stock extremes is on the rise as both overbought and oversold stock monitors testify.
Huaneng Power (NYSE:HNP) and China Housing & Land Development (NASDAQ:CHLN) show unusual momentum. The difference between the two is huge. Huaneng Power Intl. (NYSE:HNP) is a large cap China play with sufficient trading volume. CHLN is just the opposite. This makes that the overbought monitor can very well be misleading for CHLN.
The very same overbought monitor picked up unusual advance of Petrochina Co. Ltd. (NYSE:PTR). China Unicom (NYSE:CHU) and China Telecom (NYSE:CHA) are also on fire. Good news is that despite recent advances, none of these large cap stocks are considered overbought. They are still far from high end of theoretical trading range. See chart below for details.
Notable stocks from the oversold monitor include Sohu.com Inc. (NASDAQ:SOHU), Seaspan Corp. (NYSE:SSW) and Qihoo 360 Technology (NYSE:QIHU). Scroll down to second chart for details.
The oversold China stock monitor picked up Sohu.com Inc. (NASDAQ:SOHU) as well as other names. SOHU is trading closest to the low end of the theoretical trading range. Since SOHU hasn't reached $61.5 stock price yet, downside risk persists.
Other high volume, sound trading stocks on the slide include Seaspan Corp. (NYSE:SSW) and Qihoo 360 Technologies (NYSE:QIHU). These stocks are far from theoretical low prices but the decline is highly visible.
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.