China education stocks have been taking a beating over the last few months as the government is expected to crack down on the amount of hours kids are spending studying. Shares of Gaotu Techedu (GOTU) have fallen from a 52 week high of $149.05 to their low today of $12.81. This epic collapse is partly the risk of regulation in the online education sector and also a partly due to the collapse of Archegos Capital. Investors are looking for a signal that a bottom is in and that may be showing today. The stock flushed in early trading, mimicking the recent daily action. However, buyers have stepped up, rallying the stock back to above $14.00. Any close above $13.75 puts in a technical bottoming tail on the daily chart. This likely means Gaotu Techedu is forming a bullish reversal in price. The upside could be swift, with a move to $20.00 or more in the cards in just weeks. The best thing for the company would be for China to announce the regulations. The unknown is always the most scary for investors. Once the regulation is known, investors in Gaotu Techedu can value the company appropriately.
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