Our foray into Perfect World (PWRD) yesterday hit a roadblock as the stock has seen another 5% of downside; thus triggering our stop loss levels. I had offered 75% of our shares if the stock broke below $39.80 so we're down to roughly a 0.4% allocation now after increasing our position yesterday under $42. We mentioned a small gap just above $40 we were willing to see filled, but the stock actually fell into the mid/upper $38s this morning. It's currently back near $39.75 as I type this but at this point the chart is far less appetizing barring a quick jump back over $42, so we'll monitor the action with a smaller weighting.

id=BLOGGER_PHOTO_ID_5392132098351521250Volume is quite high on this selloff; I am not sure if its the specific news that is driving it down, or the type of investors who have piled into the stock the last few months (the momo types). With earnings not too far off, and my strategy of not being heavily exposed to individual stocks when they are about to report, we just might hold off playing in this sandbox for the remainder of the month unless we see that quick reversal (which would coincide with the S&P 500 breakout over 1080 I am sure).

For now, we're in wait and see mode.

Motely Fool offers their take on yesterday's governmental announcement.

China makes up the world's largest nation of online users, but the government is clearly going to keep its Internet on a short leash. There will always be the fear that China snuffs out the industry, but all five of these rapidly growing companies are trading between 10 and 14 times next year's projected profits. In other words, the geopolitical risk is already priced into these shares.

Shouldn't this help the established players, though? Keeping foreign competitors out and burdening any upstarts should benefit the companies that already have successful games on the market.

Long Perfect World in fund; no personal position