Friday’s biggest price decliner on the NASDAQ was Yucheng Technologies Limited (YTEC). The only PR I could find was that the stock got downgraded from Market outperform to Market perform by Avondale, a research firm.  The stock was trading for under $7.00 on Thursday at close.  Friday saw a massive selloff and is now trading for roughly half that.

A typical market overreaction?  Maybe, but I thing that YTEC won’t be down too long.

Yucheng Technologies Limited (YTEC) describes itself as the “Leading IT Solutions Provider for the Chinese Financial Services Industry”.    Essentially, the company provides information technology (IT), software, solutions, and services to the banking sector in the People’s Republic of China

Here is what I was able to glean from the financials (9-30-09 Q)

• $1.18 in cash per share
• No long-term debt
• Strong cash position
• Great ratios
• Profitable Operations

True, the rampant growth of the company has slowed, but it is still a very strong company.  Traders and investors seem to be punishing the company for its dismal earnings report for 2009 and a less ambitious outlook for 2010.

Here is an annotated chart to demonstrate just how steep the drop was.

Of note: The stock dropped hard on Friday, but it gapped up at open today by 7 cents.  It appears that others suddenly saw YTEC as a bargain and bid the stock up.

Interesting stock to watch and now it is priced much more attractively for traders.  Will YTEC recover and close the bearish gap?  I am watching it with interest myself to see.

Be careful not to “catch the falling knife”.  My gut is telling me that the knife has stopped falling.  However, it may limp slightly downhill or sideways for awhile before it re-establishes a bullish trajectory.

The faint of heart need not apply.

Good luck and good trading

Jeffrey Dean

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