Why Did These Stocks Skyrocket?

After a year-long recovery in the market, stocks have recently taken a turn for the worst. Despite strong corporate earnings in the first quarter and a rebound in consumer spending, investors are now bracing themselves for what could be a major correction, or even a bear market.

So what happened?

The European debt crisis that began as a minor issue in Greece has spread like wildfire to the rest of the European Union. The energy sector has been pummeled as the BP oil spill continues to drag on, taking with it the share prices of almost every company involved with exploration, drilling, or services.

In times like this, it's not odd to see drastic movement in your portfolio, stocks that move by 5%-10% on barely any news at all. So let's see which stocks skyrocketed on Friday and examine whether or not there was any logic to justify their shift.

Source: Yahoo! Finance.

Canadian Ethernet equipment provider DragonWave reported a pretty impressive first quarter -- revenues jumped by 275%, gross margins increased from 35% to 44%, and the company managed to increase their cash cushion $3.5 million to a total of $115.8 million. CEO Peter Allen says about the company's success that, "The global mobile broadband Internet is unstoppable, which will drive the growth for DragonWave solutions in markets throughout the world."

Although the CEO may believe broadband to be unstoppable, revenues from major customer Clearwire (Nasdaq: CLWR) are not; in fact, sales are expected to slow down about a quarter before previously anticipated. This is probably why shares of DragonWave had plunged about 25% the previous day on news of a semi-weaker outlook for the second quarter; obviously that drop was a bit drastic, so investors are most likely just scooping up shares at what looks to be an overly discounted price.

Chinese companies fared pretty well after the market opened on Friday, with Telestone Technologies helping to lead the way. The company provides wireless network solutions in China, and it's seeing demand increase for its services. Big time players like China Unicom and China Mobile (NYSE: CHL) each added around 1 million subscribers to their 3G networks in May alone, and Telestone should be able to capitalize as the total number of network subscribers increases. Growth in China should also help other telecom companies like Alcatel-Lucent (NYSE: ALU) and Powerwave Technologies.

To be honest, sometimes companies, especially small caps, just rise and fall, and there's no logical rhyme or reason. That may just be the case with China Security and Xinyuan Real Estate. Both companies have been riding the Chinese rollercoaster, as it seems like concerns over declining auto sales, tighter lending, and an overall slowdown in growth may have weighed on the prices of these stocks. However, both stocks are trading for multiples below six times earnings, so the cheaper they get, the more investors will inevitably jump back on the growth story -- no matter how dire the headlines get.

The Foolish bottom line
In the choppy waters of today's market, you have to watch your portfolio carefully -- but be careful to distinguish between random volatility and a true change in fundamentals. If your stocks are jumping all over the radar screen, but your investing thesis remains intact, then just sit back and hold on for the ride