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Keep Your Eye on Oversold China stocks

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CTEL_2010319_noon_tumb August 12, 2010 (Chinavestor) It's hard to say where the bottom is for the market, but certain oversold China stocks offer great upside potential once we hit it. But investors have to be very careful! Stocks that are hit the hardest, Giant Interactive (NYSE:GA), CDC Corp. (NASDAQ:CHINA), Mindray Medical (NYSE:MR), Vimicro International (NASDAQ:VIMC) and American Dairy (NYSE:ADY), fell on disappointing earnings and are less likely to make a swift comeback. Baby formula maker Synutra International (NASDAQ:SYUT) fell hard on allegations but might make a comeback. Investors have to look at future earnings potential to see if a comeback is a possibility. Mindray Medical (NYSE:MR) has been hit one of the hardest but is a real company with real earnings. Something to think about.

Giant Interactive (NYSE:GA) is operating in a very fierce competitive market environment with companies like NetEase.com Inc. (NASDAQ:NTES) or Shanda Games (NASDAQ:GAME). It's the game pipeline that determines ultimate success - something that Giant Int. (NYSE:GA) is the most vulnerable.

Synutra International (NASDAQ:SYUT) fell hard and is not extremely oversold, but investors have to remember that this is a real company with real products and sales. Baidu.com (NASDAQ:BIDU) was similarly oversold for a short period of time when a paid advertisement scandal hit its shares last October, but robust earnings cleared a way for a comeback.

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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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