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Vulnerable China stocks to watch, May 11

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watch_5 May 12, 2011 (Chinavestor) China-Biotics (NASDAQ:CHBT) and Mindray Medical (NYSE:MR) advanced too much, too fast, according to the overbought monitor. Additional vulnerable stocks include ChinaCast Education (NASDAQ:CAST), Wuxi Pharmatech (NYSE:WX), Jinpan International (NASDAQ:JST) and Guangshen Railway (NYSE:GSH), according to the overbought chart. LDK Solar (NYSE:LDK) remains the most oversold Chinese stock at the moment while Aluminum Corp. of China (NYSE:ACH), Sutor Technology Group (NASDAQ:SUTR), Petrochina co. Ltd. (NYSE:PTR) and Silvercorp Metals (NYSE:SVM) are stocks of interest from the oversold monitor.

China-Biotics (NASDAQ:CHBT) is trading closest to theoretical highs and thus is vulnerable. Strong sales growth helped Mindray Medical (NYSE:MR) reach over $30 for the first time in 2011, but the advance is too much, too fast, according to the overbought monitor. Downside risk exceeds upside potential for Mindray for the short run.

ChinaCast Education (NASDAQ:CAST) advanced amid heavy volume and hasn't reached theoretical highs yet. More upside is possible.

Wuxi Pharmatech (NYSE:WX) has been advancing steadily with slightly increasing volume. This is a good sign suggesting more upside may coming.

he overbought monitor pickled up the unusual uptick of Jinpan International (NASDAQ:JST). The stock surged in the afternoon session on Wednesday with heavy volume, suggesting buyers are serious here. Presence of strong money flows is an indication of more upside in most cases.

Large cap Guangshen Railway (NYSE:GSH) became overbought and has pulled back since. With weakening fundamentals in China , e.g. government tightening, short term outlook is uncertain for this stock.

OB_2011512

LDK Solar (NYSE:LDK) and the rest of the solar sector is hurt on fundamentals, e.g. weakening demand from Italy, Spain and Germany. With government subsidies curtailed, export oriented Chinese PV manufacturers are hurt. While LDK Solar (NYSE:LDK) is oversold, the situation won't improve dramatically until fundamentals change.

Resource players are hurt on global sell-off. Aluminum Corp. of China (NYSE:ACH) and Silvercorp Metals (NYSE:SVM) fell the chill first hand. Petrochina Co. Ltd. (NYSE:PTR), the largest Chinese oil producer, is also falling as price of oil went from $120/barrel to $96/barrel.

Sutor Technology Group (NASDAQ:SUTR) fell four days in a row but more may be coming for the stock hasn't reached theoretical lows yet.

OS_2011512

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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