FUQI (Long)...

I had considered this pick for last night instead. Judging by today's 8% move in FUQI versus the flat performance of yesterday's pick, I made the wrong call. Oh well. Today's pick if Fuqi International, a Chinese company dealing primarily in jewelry and luxury goods. At last count, FUQI had ~70 jewelry retail locations in China, so there's plenty of room for growth.

FUQI scored strong interest from two screens and some interest in four others, for a total of six screens. It scored 100% on the James O'Shaughnessey screen, 93% on the Peter Lynch screen, 85% on the Martin Zweig screen, 80% on the Kenneth Fisher screen, and 79% on both the Motley Fool and John Neff screens. Basically, FUQI lit up the growth screens and is screaming growth.

Technically, FUQI's in a fairly pronounced downtrend. It topped out back in September around $32 and has now fallen under $20, despite today's $1.47 rally. Volume picked up today, too. Round number $20 will probably act as resistance for the time being, along with the 50-day EMA around $20.50. I do not believe the move up that began around Christmas is sustainable in that I don't believe FUQI will be able to generate enough momentum to break the downtrend. However, I believe FUQI eventually will break the downtrend, and I'll be right there waiting when it does. I'm ok with missing the absolute bottom because that means I didn't ride it all the way down. Plus, that way, I get better-defined risk.

FUQI does not pay a dividend and is not expected to report earnings again until March.

FUQI is optionable. The chain is liquid with decent volume and open interest, plus the strikes are tight. I like the March $17 calls as either an outright purchase or the buy leg of a call spread. I would still not rush to chase this name because I think it will yield a better entry in the coming days. I'm content to be patient here.



Position: none

Disclaimer: This is not a recommendation and is presented for informational purposes only.