June 23, 2014 (Chinavestor) The following Chinese stocks were on the move last Friday. Huaneng Power Intl. (NYSE:HNP) and 500.com Ltd. (NYSE:WBAI) advanced unusually strong compared to the rest, while Sohu.com Inc. (NASDAQ:SOHU) and CNOOC Ltd. (NYSE:CEO) fell unusually hard.
Huaneng Power International (NYSE:HNP), the largest Chinese independent power producer, advanced $1.05 last Friday, far more than most other Chinese stocks. 500.com Ltd. (NYSE:WBAI) advanced $.70 but that move should not confuse investors. WBAI has been steadily eroding since hitting all time highs earlier in March. 500.com Ltd. has lost over 25% of its value since then with no end of sight of the decline...
To see how much HNP and WBAI advanced compared to the rest, see chart below.
Despite a record close for the Dow and the S&P last Friday, a good number of Chinese stocks fell that day. Sohu.com Inc. (NASDAQ:SOHU) fell as much as $1.38 while CNOOC Ltd. (NYSE:CEO) declined $1.05. CEO's weakness is unusual given record crude prices in the wake of turmoil in Iraq.
The overbought indicator may provide explanation to CEO's weakness on Friday. CNOOC Ltd. (NYSE:CEO) is trading closest to extreme overbought position despite a pull back on Friday. In other words, CEO was overbought before the decline. Good news is that CEO is not overbought anymore. See chart below for details.
If anything, investors should worry about stocks like NetEase Inc. (NASDAQ:NTES) and Rene Solar (NYSE:SOL). Pace of advance for these stocks has been unusually strong!
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.