The Long and the Short of China – September 30, 2024
Dan here at StockMarketMentor.com. I want to look at China today. No, we’re not going to take a trip, I’m just looking at the charts here.
As you probably know, there’s been a pretty big move in China. President Xi basically pulled out the Bazooka, the fire hose, the whole bit, and said, the Chinese economy is going down, not on my watch. What happened was, that we got this big massive short squeeze. And just about the same time David Tepper, who knows a thing or two about making money, was pretty vocal about saying he’s removed his limits in investing and he’s all-in on China. So there’s every reason to be bullish on China.
Now, let’s look at a couple of stocks. We’ll look at KWEB ( NYSEARCA: KWEB ), and then Alibaba ( NYSE: BABA ). To say that you’ve missed the initial move is probably an understatement. In less than a week or so this ran up 30 percent, and today you get this big gap up, almost 5 percent. And then off the top, off the open, down four, it just barely closed up.
If you actually looked at this on a line chart it would look, let’s just say, a little different. You just see almost a flat trade there, so it’s not a big deal. But when you look at it on candlesticks it makes a huge difference. It’s way outside the upper Bollinger Band, it’s been trading outside the upper Bollinger Band, closing for 1, 2, 3, 4, 5, 6, 7, 8, eight days in a row.
This thing’s been trading higher than statistically it’s supposed to. So it’s kind of breaking a few laws of math, which means that we should expect, at some point, this to move lower. I would still be really, really bullish on this because if you look at this, look how gappy this is. And even today, when we got a pretty ugly day, it opened up right at 35.50, and then fell down, very, very obvious here.
But you still see a higher intraday high than these, and you see a higher intraday low than all of these. So the intraday day high and lows are still in a really bullish situation. So for all we know, we could actually see this continue to run higher. The reason I’m mentioning this to you is absolutely not to say, Oh, go ahead and short this, I don’t even know if you can. I’m not going to find out because I don’t really give a crap.
If we look at Alibaba ( NYSE: BABA ) we see the same kind of thing. It had a big gap up here today, and then it’s closed lower, just barely lower than the prior day. We see the same kind of dynamic, right? So is it time to short these stocks, whether it’s KWEB ( NYSEARCA: KWEB ) or BABA ( NYSE: BABA )? No.
The reason for this video is to suggest that, if you’re long these stocks, enjoy the run. But it’s probably time to take some off the table. Because unless you bought this morning, you’re probably holding some pretty good gains. The Market’s pretty volatile, and these types of moves don’t continue to reward you. They will hurt you badly if you overstay your welcome.
So I’m not suggesting that you sell everything, you can if you want to but it’s your trade. If you want to make it my trade, great. If you make money on it, send me a percentage of the money you made. And if you lose money, send me a bill and I’ll tell you it was your trade. The bottom line is, you’ve got to make your own decisions.
However, in this case, my decision would be, do you know what? I got some pretty good money here, really, really gappy, we just don’t know which way this trend is going. But if I really want to look at this, I think it’s time for me to maybe take half off the table, something like that.
Every once in a while I’ll get some wiseacre saying, Oh, you don’t know what’s going to happen. Well hey, you’re smarter than you look, buddy I don’t. All I’m doing is trading the odds here. I’m trading the way price actions move. I’m trading math, and if you have a really, really nice return here, book some of that so that it can make up for other losses that you’re going to take.
Ultimately, what I would love to see happen on these because I don’t think David Tepper’s wrong, I’d love to see this pull back a little bit more so that we could get an entry and run even higher here. I don’t own any Alibaba ( NYSE: BABA ). I do own some KWEB ( NYSEARCA: KWEB ). I took some profits on it, I’ve already done what I’m suggesting you consider doing. And then I’m just going to ride the rest of this, I’ve got to stop a little above break even so I’m guaranteed to have a decent trade. Hopefully, I’ll have a really awesome trade.
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