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Oversold internet, telecom stocks

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questionmark December 19, 2011 (Chinavestor) After a massive retreat last week, the oversold end of the China stock universe is in focus. Baidu.com Inc. (NASDAQ:BIDU) fell hard and has started to approach theoretical lows. China Mobile (NYSE:CHL), another industry leader, is also a stock of interest. China's largest fixed line operator China Telecom (NYSE:CHA), is also a stock of interest besides Sina Corp. (NASDAQ:SINA) and E-House Holdings (NYSE:EJ). Seaspan Corp. (NYSE:SSW) is a stock with strong money flows and is not overbought yet, as the second chart on this page testifies.

While technically still not oversold, Baidu.com Inc. (NASDAQ:BIDU) offers more upside potential than downside risk. Chinese large cap technology stocks suffered as risk aware investors shunned the sector. The same dynamics hurt Sina Corp. (NASDAQ:SINA), China's second most visited website. And while there is room left to the downside, both BIDU and SINA look appealing on valuation.

E-house Holdings (NYSE:EJ) is not oversold and looks similar to Sina Corp. (NASDAQ:SINA) on the monitor below. But outlook is uncertain for China's housing market is still softening.

China Mobile (NYSE:CHL) has been a defensive play and is offering a limited downside at this point. China Telecom (NYSE:CHA) is also a relatively safe stock.

OS_20111219

ChinaEdu Corp. (NASDAQ:CEDU) is a low volume, small cap play that is hard to read by technical indicators. But Seasapan Corp. (NYSE:SSW) is solid on the overbought monitor with more upside potential.

OB_20111219

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.

aa_OBOS_expl_2weeks


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