Fuqi International (FUQI)

FUQI has been a standout performer during the current rally but last Monday it suffered an ugly gap down, triggered by doubts about the sustainability of the Chinese recovery. If China can’t maintain its economic rebound then a consumer driven stock like FUQI is likely to be a casualty.

But FUQI has shown no further price progress lower. And while there remains an ugly gap in the chart price is trying to penetrate that gap this morning on volume. This would be a logical area for the stock to meet resistance and for a new leg lower to begin, so caution is warranted.

But we have seen a significant recovery in the US market and in many stocks off of last Monday’s gap down. A long in FUQI here (stock is currently trading around $25.70) is a bet that it can bridge its gap and continue its uptrend. We’d recommend a stop under 25.30.