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Most vulnerable China stocks on October 20

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bubble_1 October 20, 2010 (Chinavestor) What a difference a day makes! Overbought and momentum driven Chinese stocks tumbled en messe on Tuesday as major U.S. indices headed south. While none of those stocks fell apart and have approached theoretical lows yet, the sudden change in the stock price suggests more downside is likely unless the market finds support. One of the most vulnerable China stock on the oversold indicator is China Natural Resources Inc. (NASDAQ:CHNR), though its miniscule volume renders the indicator less accurate. What were really on the move included Trina Solar (NYSE:TSL), Suntech Power (NYSE:STP) and ReneSola Ltd. (NYSE:SOL) from the solar sphere. Origin Agritech (NASDAQ:SEED) and AgFeed Industries (NASDAQ:FEED) gave back some of their previous gains just as fast as they got it. Investors will have to exercise caution with stocks like A-Power Energy Generation Systems (NASDAQ:APWR) or China Automotive Systems, Inc. (NASDAQ:CAAS) as well.

Energy stocks fell hard as price of oil fell below the $80 mark. It was multiplied by the fact that solar stocks enjoyed a tremendous rally in the pat months, making them vulnerable under such circumstances. No wonder iconic solar plays like Trina Solar (NYSE:TSL) or Suntech Power (NYSE:STP) fell hard for the day. But the tumble was widespread effecting ReneSola Ltd. (NYSE:SOL), Yingli Green Energy (NYSE:YGE) and the like.

The agriculture sector was very similar to solar from a technical point of view. Hot stocks like Origin Agritech (NASDAQ:SEED) and AgFeed Industries (NASDAQ:FEED) fell hard for the day with more downside potential, unless the market changes direction.

A-Power Energy Generation Systems (NASDAQ:APWR) and China Automotive Systems, Inc. (NASDAQ:CAAS) fell significantly; just to extend the list. For a lists of the most vulnerable China plays as of today, see chart below.

OS_20101020_2

The overbought indicator changed dramatically from a day before. Jinpan International Limited (NASDAQ:JST) was able to hang on to gains but it was rather an exception.

OB_20101020

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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