There were a handful of charts I really liked in the Chinese sector. DouYu ( DOYU) broke out higher Tuesday. Huya ( HUYA) was three days into a breakout. Bilibili ( BILI) has been a beast. Baidu ( BIDU) looked ready to roar Tuesday, but faded hard. Joyy ( YY) , Tencent Music ( TME) , and on and on. I could spout off a lot of great looking charts in the group, but given the recent run and the headlines we're seeing, I don't think this is where I want to get aggressive right now.
China was an area I bought in the winter of 2019, believing the trade war impact on the stocks was too pessimistic. Now that we've basically forgotten about that risk, I believe the pricing pendulum has swung back to the over-optimistic side of the fence. I'm not sure the idea of the U.S. delisting Chinese companies from major domestic exchanges will ever pass, but I do anticipate it will pick up steam. If it forks into a no new listings, then we could see a nice rally in Chinese companies already listed stateside. If we skew in the direction of no listings, then I would imagine it would be troubling for existing Chinese listings and a benefit to their foreign alternatives or foreign competitors.
One of the risks I hate most is predicting the moves of politicians: Often their decisions are based on re-election, ego, or self-interest, and trying to analyze those is virtually impossible.
In other words, delisting Chinese companies could push U.S. stocks higher. The caveat here is how the Chinese government, Chinese investors, and Chinese funds react. If the market were closer to lows than to highs, I would be more patient, but I believe traders should consider defining or reducing their risk in the Far East until we have a bit more clarity in the situation.
What might be most interesting here is how a name like Yum China ( YUMC) is treated.
Rather than defining my positions, I've eliminated them for now. The best part about the market is there are always opportunities. Our jobs are to weigh risks and rewards. One of the risks I hate most is predicting the moves of politicians. Often their decisions are based on re-election, ego, or self-interest. Trying to analyze that from my perch is virtually impossible.
I hesitate to say it, but it might be time to begin looking at cannabis again. We're starting to see multiple bankruptcy filings in the sector. This is the catalyst we need to find a bottom: Fewer companies competing for a commoditized market. We're certainly nowhere near out of the rough with the sector, but it's time to begin stalking potential entries.
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