PreMarket Prep Stock Of The Day: GSX Techedu

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By now, it's well-known that several issues in the media sector as well as Chinese companies listed on U.S. exchanges were decimated in Friday’s session due to forced liquidation by the family-owned Archegos Hedge Fund. One of those issues that were a victim of the onslaught was GSX Techedu Inc. GSX.

The Company: GSX Techedu is a technology-driven education company with core expertise in online K-12 courses. Its K-12 courses cover all primary and secondary grades. It also offers foreign language, professional and interest courses.

Volatile Well Ahead Of Friday’s Decline: After bottoming in May at $27.06, GSX traded to $119.94 in October but retreated to end the year at $51.71. It caught a relentless bid in January, sprinting to $149.05, but was unable to hold that elevated level and retreated to end the month at $105.01.

The issue had a tighter range in February ($80.60-$109.78) and was able to end the month in triple-digits at $102.85.

A Monster Mash In March: On March 2, the issue rallied to $117.27 but weakened to end the session at $98.42. That was the last day the issue traded in triple digits. It struggled to remain in the $90 handle, closing above the level as late as March 17 at $92.67.

Interestingly, the issue was lower in the next six sessions, falling from $92.67 to $66.75 and the major selling was yet to commence.

The Hammer Comes Down: The selling on Friday began with a $5 lower open followed by a brief $2 rally that didn't come close to the bottom of Thursday’s range. Once the Street got wind of the liquidation rumors, it was all she wrote.

Around 11 a.m. ET on Friday, with the issue clinging to the $55 level, the sellers came in for the kill. At that time, a step-down seller(s) was whacking every bid in sight until the issue finally bottomed over $25 lower, bottoming at $29.40. That low came in just under its June low ($30.60).

A short-covering rally into the close boosted the issue to $39.01.

Day Eight Of The Retreat: There is some good news and some bad news for shareholders of the issue in Monday’s session. The bad news is that it opened at the high-tick for the session ($38.75), which was under Friday’s close ($39.01). Therefore, traders that thought they caught a bargain on Friday haven't been even been able to sell the “mark” or get flat at Friday’s close.

The more bad news is that the issue has distanced itself from the open, trading as low as $32.80, and is attempting to remain in the $35 handle as 12:45 p.m.

The good news is it hasn't breached Friday’s low. Therefore, there's some hope that there buyers in the issue that think they have missed out on a short-term bottom. As a result, there are attempts to purchase shares well above Friday’s low.

Moving Forward: For longs, the longer Friday's low holds the better as buyers will have to find intermediate levels ahead of that low to accumulate shares. For a meaningful rally on the upside, a rally above the current high for the session ($38.75), which is just under Friday’s close ($39.01), may instigate a short-covering rally into a rising market.