Investors Continue to Pull Out of China

Aug 29, 2021 | Should Swing Traders be involved in the Chinese markets?

Weekly Newsletter- Week of 8.29.2021 

Alibaba Continues to Plummet 

This week, we learned of heavy institutional selling (over 8%) of Alibaba ($BABA) shares during the latest 13F cycle. Its been a brutal year for Alibaba stock, which currently sits at $159 a share, a far cry from its 52-week high of $319. For context, BABA shares are down 14% this month, over 28% the last 3 months, and 43% for the year! This may not be the end of the selling though, as Alibaba’s 52-week low of $152 a share is in clear proximity and approaching fast! Frequently referred to as the Amazon of China, Alibaba has often been considered one of the few safe havens when investing in Chinese stocks. But with escalating concerns over foreign regulations and increased uncertainty overseas, Alibaba continues to plummet in US markets. Institutions still own over 26% of all Alibaba shares, which strongly suggests the fire sale may not be over. For context, this 13F (mentioned above) spans from April to June. Of Alibaba’s 50 largest investors, 29 of those 50 trimmed their Alibaba positions during that time frame. 

Reason to Worry 

As we've discussed in the past, trading Chinese stocks can be notoriously volatile. First and foremost, as a high-profile eCommerce stock, Alibaba benefitted greatly from the pandemic and the work-from-home economy. That may explain short-term selling, but Alibaba has several other long-term headwinds it must conquer. Alibaba was recently slapped with a $2.8B fine for forcing merchants to exclusively sell on their platform. Additionally, the Chinese government should always be a consideration when investing in foreign assets. With different laws and regulations, there’s no telling when an unexpected policy change could send the stock price reeling. Many other international stocks have also been taking a hit in the states over pandemic and regulatory concerns.

Weekly Swing Trades

PNRG (Prime Energy)

October 2, 2022

Entry Price:

80.62

Stop Price:

76.85

Target Price:

88.04

Time Frame:

1 Week Hold

Expecting a short-term bump after a recent OPEC+ announcement regarding the a supply constraint to oil. The constraint would result in ~1M less barrels of oil per day, which should cause a price jump. Low RSI and bouncing off our 250 day moving average, both hallmarks of a good swing trade.

DV (Doubleverify)

October 2, 2022

Entry Price:

27.75

Stop Price:

26.75

Target Price:

29.00

Time Frame:

3 Week Hold

Using our moving averages heavily on this swing trade, look for continued strength as we try to notch out a 6-8% gain. Specifically, we are taking advantage of of a recent cross over in the 50 day moving average. Last week closed down, so wait for confirmation of a reversal.

Stimulus is 'Tapering': What it Means for Investors 

Federal Reserve will plan to begin tapering before the end of the year. But what’s that mean for investors? Chairman Powell recently indicated that the central bank would begin withdrawing some of its 'easy-money’ policies before the year ends. Translation: All that pandemic-fueled stimulus that’s been getting pumped into the economy for the last 18 months will be coming to end in the near future- or so they say. In a speech that has been on investor's radars for months, Powell noted on Friday that he believes the economy is at a point where it no longer needs additional policy and support. Additionally, this may mean that the Fed will likely begin slowing down on the number of bonds it's been buying each month. 

But What About Interest Rates? 

Powell also noted, “the pace and timing of the coming reduction in asset purchases will not be intended to carry a direct signal regarding the timing of an interest rate liftoff”. Though we currently sit above the Fed’s 2% target rate, “we have much ground to cover to reach maximum employment”. As interest rates have been one of the key drivers of market sentiment over the last several months, the market took this speech very positively. Powell’s speech helped to send all major indexes to new highs, while bonds, as expected, sold off. 

Bitcoin Mining Difficulty Rises 

Bitcoin mining difficulty, which is used to measure the number of computing resources required to mine Bitcoin, increased for the third time in a row this week. This was taken as a positive sign for long-term Bitcoin sentiment and the cryptocurrency market as a whole. Despite growing regulatory concerns from China, Bitcoin continues to look for long-term support. Bitcoin mining difficulty resets every two weeks and can be used as a key barometer to the overall health of the network. Bitcoin has been on a tear for the last month as the crypto is up over 20% for the month. Crypto continues to climb as it currently sits over $48,000. We’ll see if the positive trends can push Bitcoin back over $50,000 support line. The asset has an all-time high of $64,000. 

Upcoming Economic Reports

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Weekly Watchlists

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Weekly Review

Market Performance- Week of 09.25.2022

Recent Winners

SBUX (Starbucks)

SBUX (Starbucks)

Entry Price:

85.00

September 11, 2022

Price at High:

89.90

Return for Members:

5.76%

Timeline:

2 Month Hold

Strong momentum over the last few weeks. Watch for a mean reversion, but if moving averages stay consistent look for an early play to open the week.

PNRG (Prime Energy Resources)

PNRG (Prime Energy Resources)

Entry Price:

83.20

September 4, 2022

Price at High:

100.00

Return for Members:

20.19%

Timeline:

3 Week Hold

PNRG had a drawdown to historical levels of support (around the 100 day moving average). Looking to make an entry in the coming days as we also have macro tailwinds with the energy crisis in Europe.

PYPL (Paypal)

PYPL (Paypal)

Entry Price:

87.00

August 28, 2022

Price at High:

103.00

Return for Members:

18.39%

Timeline:

4 Week Hold

Playing off the dip in June, we're starting to see momentum as the 50MA is crossing over the long-term averages. Look to for momentum to continue and an early entry on Monday.

Recent Watchlist Winners

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