Perfect World (PWRD)

This morning the stock is breaking out of the same type of pattern as STEC, which we profiled on this page last week: a high tight flag.

While it could work we’re not endorsing it.

Notice how STEC traded tightly during its consolidation and how volume dried up. That’s a sign of institutional support.

PWRD’s high volume whippy trading is a sign that traders are all over it, not exactly the breed you want holding your stock if you are expecting large, non-volatile gains.

In the bullish environment we’re in anything can work on the long side, and PWRD, a Chinese gaming stock, is certainly in a very hot sector, so we’re pointing out the action for the adventurous.

For those wanting exposure to this sector our preferred vehicle is Netease (NTES), which we profiled last week. We also like BIDU, which we also profiled, for exposure to the broader Chinese Internet content sector.