Here’s my take on a couple of Chinese stocks. JD.com (JD) and New Oriental Education (EDU) look alike. And you should trade them the same way. (June 26, 2019)
EDU JD EDU JD
I want to look at a couple of Chinese stocks today. Lately, I really haven’t found anything in the China space to get my attention but a couple of them came to light today.
The first one is New Oriental ( NYSE: EDU ). I was looking at this yesterday and I noticed that it’s rebounding right around the 50-day moving average. And then today the stock gapped up just slightly, not very much at all, it is trading on a little bit higher than average volume. I am doing this video with about a half an hour to go in the trading day and I suspect that by the time we do get to the end of the day we are going to see a really nice volume number here so the stock is still working.
Here’s the thing, I am looking at this as about less than even a $5.00 risk. If you put your stop right below today’s intraday low, that’s 91.92, around 91.90. You can keep it tighter if you want but just remember the tighter your stop the more likely you are to get stopped out for a loss. Of course, the looser your stop the less likely you are to get stopped out but if you do it’s a big loss. So you have to adjust your position size to reflect the risk that you are taking based on the stop loss that you are setting.
The way I am looking at this is, it’s almost, almost kind of a volatility squeeze, I guess we could just call it a base. If the stock starts breaking out above $97.00 or so I think this moves quickly above $100.00, so you could even buy this stock now just keep a stop set. Then if the stock runs above, we’ll say, $100.00, that’s when you add to the position. Because you can see at the weekly chart the stock has been really consolidating for the last few months at this level and a move above $100.00 really puts this into blue-sky territory.
Another one is JD ( NASDAQ: JD ); here’s the thing, you look at the weekly chart and it doesn’t look that much different than EDU ( NYSE: EDU ). But if we look at the daily chart this is where it gets pretty interesting. The stock had been trading below the 50, bounced off the 200-day moving average; so moving averages here are relevant. Not all stocks really do have relevant moving averages but here you got big rebound a few different times off the 200-day moving average. Finally, a run up to fail at the 50, a shallow pullback and then a break out through the 50 and then a test of the 50 and, boom, now we are getting new highs. And so I have just kind of completed this little zigzag pattern for you.
The way I would be trading this is, I think you can go ahead and get long this stock now and just keep a stop below today’s intraday low. It wouldn’t surprise me if the stock was kind of backing and filling here for a while. But this was a high volume day today, a big day that broke this out above $30.00. I think you can be long this stock just be a little patient with it, don’t expect it just to rocket up here, but the fact that it is now finding support at the 50-day moving average, that’s a really big deal.
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