What is going on with Chinese stocks?
Have Chinese stocks bottomed?
Chinese stocks were one of the first areas to break down back in Mar ‘21 (on a relative basis), are they bottoming now? Well, there is some serious outperformance taking place when I look at ASHR vs SPY over the last month, ASHR has outperformed by over 18%!
ASHR Xtrackers Harvest CSI 300 China A-Shares ETF vs SPY - 2yr chart
Further, looking at how China Internet stocks have performed vs their US counterparts, there is also some large outperformance here as well with KWEB +25% over FDN the last month, and the 50d MA has crossed above the 200d MA in the below chart indicating a possible change in trend in this relationship.
KWEB CSI China Internet Fund vs FDN Dow Jones Internet Index Fund - 2yr chart
What about the stand alone charts?
If you are a regular reader of my work / Tribeca Trade Group member you know what I like volume at price as an indicator for spotting trend changes.
I would like to see the KWEB ETF regain its 2022 Value Area, which means a move > $35.62, and ASHR to stay above its 200 period Moving Average for confirmation that the bottom may be in.
KWEB Weekly Chart
ASHR Weekly chart
Now that we have a sense of the bigger picture using weekly charts, what about trade ideas? Before we do, keep in mind that there is extra level of risk with China companies because the Chinese government is communist and can makes changes to these companies at a moments notice… so position size is important here when there is added risk.
PDD Pinduoduo Inc.
Pinduoduo Inc. operates as an e-commerce platform. The Company offers a wide range of merchandise online including groceries, fashion, beauty, and electronics. Pinduoduo serves customers worldwide.
Trade Idea: long PDD if it retakes its 200d MA , with an upside target of $70.
XPEV - XPeng Inc.
XPeng Inc. designs, produces, and distributes electric vehicles. The Company designs, develops, manufactures and markets smart smart electric vehicles, as well as finance, parts, and maintenance services. XPeng serves customers in China.
Trade Idea: long XPEV with upside targets $30.2 and $34.3 , stop price $24.5
Other charts of interest (Trade Ideas shared in the Tribeca Trade Group trading room)
DQ - Daqo New Energy Corp
Daqo New Energy Corporation manufactures polysilicon. The Company markets its polysilicon to photovoltaic product manufacturers who process it into ingots, wafers, cells and modules for solar power products.
FUTU - Futu Holdings
Futu Holdings Limited operates as a holding company. The Company, through its subsidiaries, offers an online brokerage platform that enables individual investors to trade in listed stocks. Futu Holdings serves customers in the United States, China, and Hong Kong.
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