I really like AsiaInfo Holdings (NASDAQ:ASIA) (fundamentally) but Goldman Sachs really crushed the stock with a downgrade at the most inopportune time a few months back. Then they upgraded the stock on March 1st, creating a huge surge and gap up. It is almost as if Goldman is playing the stock like a fiddle ... must be nice to move a stock (or market) wherever you need it to go.
Since the Goldman upgrade I've been torn - should I chase this story? It's a breakout, after all, but that nasty gap. I see a similar pattern in countless charts now and the next serious cleansing in this market has a lot of "gap filling" to do. But stocks can move ever upward on momentum so the gaps mean nothing... until they do. I obviously decided to not chase it, which has cost me opportunities in other stocks, but saved me some pain in this one. Most likely I would have jumped in just as the stock was about to stall. (Click to enlarge)
Today ASIA broke below the 50-day moving average, so my set up improves substantially to see the gap filled, even in an incredibly strong market. I have therefore decided to put on about a 3% short allocation in the $26.20s with the very obvious target of the upper $24s to cover. If the market can actually have a -1 to -2% day (perish the thought) I am sure this puppy would fill quickly. I will consider stopping out if the stock jumps back over a level somewhere near today's high.
I will continue to point out that the Chinese stock market is lagging, and even the Brazilian one is not doing that well. While they are digesting huge gains of 2009, this divergence between the US (and to some degree Europe) and some of the favored developing markets is something to keep an eye on. It has not mattered... yet.
Disclosure: Short AsiaInfo Holdings in fund; no personal position