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Vulnerable China stocks as economy slows

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watch_out August 11, 2010 (Chinavestor) Despite significant losses, more downside is possible for Giant Interactive (NYSE:GA), American Dairy (NYSE:ADY), Mindray Medical (NYSE:MR) or HQ Sustainable Maritime (AMEX:HQS). Synutra Int. (NASDAQ:SYUT) or Global Sources (NASDAQ:GSOL) doesn't look good either, according to the oversold monitor. The number of overbought China stocks is on the decline, chances of additional upside is slim for Huaneng Power Int. (NASDAQ:HNP) and Tiens Biotech (AMEX:TBV).

Oversold stocks have a chance to bounce back up when market conditions improve, not when investors are on the defense. This in turn suggests the worst is not over for Giant Interactive (NYSE:GA), a Chinese online game developer and operator. The sector was oversold but investors have started to pick up shares of Shanda Games (NASDAQ:GAME) and Perfect World (NASDAQ:PWRD) in July, leaving less liquid GA in the trouble.

Disappointing earnings hurt American Dairy (NYSE:ADY) and Mindray Medical (NYSE:MR). The Chinese medical equipment maker reported dismal first quarter but promised a better second quarter, however was unable to live up to its promises. Now the company is facing a deficitĀ  of confidence for a longer term.HQ Sustainable Maritime (AMEX:HQS) is another company with disappointing earnings. The more the company falls the higher the chances of a quick bounce back up. But the stock hasn't reached theoretical lows just yet, suggesting more downside for the short term.

Synutra International (NASDAQ:SYUT) remains under pressure following the baby formula scandal, engulfing this large player. more downside is possible, according to the oversold monitor below.

Global Sources (NASDAQ:GSOL) fell seven days in a row, suggesting a technical correction might take place, when market conditions improve.

OS_2010811

Huaneng Power Int. (NYSE:HNP), China's largest independent power producer, reported strong second quarter operational data yet failed to gain traction as China's economy slows. Leading the overbought monitor for a large cap NYSE listed China stock such as HNP calls for a correction.

OB_2010811

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.

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