Should you give these Chinese stocks a try in 2017? MOMO YRD WB SINA BZUN

Market Analysis

As China attempts to transition it's model from a manufacturing to service economy many have concerns about the debt it's accumulating. In addition to that pundits are predicting that economic growth would slowdown by up to 6.5% and even suggesting one-off devaluation. If we look at FTSE China 50 Index which consists for 50 largest Chinese companies we notice that it has been falling since the past two weeks and this is likely to continue amid growing concerns over Fed rate hike but we know that Chinese Government can step in anytime and create a favorable environment as we've seen in the past.

Let's take a look at 5 trading ideas in this category.

MOMO – Momo Inc.

Trading at an all time high territory above of $30 and also above the prior resistance of $28 - $28.50 (now acting as a support) MOMO is the only stock breaking above the bullish trend channel for the past three months that all of the Chinese stocks mentioned in this article have in common (see chart annotations). After the initial pop on the back of successful fourth quarter earnings results backed by 5 times increase in sales, stock gave away some of it's gains end of last week because it's currently in a profit taking zone along with short piling up as it's trading at an all time high territory. Also note that current short interest is around 32% in MOMO.

As long as Elasticity trends upwards (further away from 0) and either $30 or even $28 holds, we can see some sideways action and a grind upward for a possible short squeeze. I'm neither bullish or bearish on the stock rather I'm open to joining trend on either direction after I see how the stock behaves at two major support points and if Elasticity starts to pull back to 0.

MOMO-03-02-2017-technical-analysis

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YRD – Yirendai Ltd.

YRD is right at the mid point of that bullish uptrend channel from mid January 2017. Earnings are due next week and this stock has a history of beating earnings. I've traded YRD many times in 2016 and in 2017 in the short term as it's a lucrative trading vehicle with high intraday price movement. Despite the concerned raised early January stock has gained $10 in the past 3 months. How the earnings are going to be is anyone's guess but YRD usually moves in one direction for at least few months so if YRD can hold $25 and break $30 we can see $35 quickly. This would be a great swing opportunity after earnings.

YRD-03-12-2017-technical-analysis

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WB – Weibo Corporation

Weibo was valued at 100 times it's earnings prior to last earnings and smart money bears were betting heavily against the stock as short interest was extremely high at 60%+ and they were correct. WB has broken below it's bullish uptrend continuation channel and I think it's heading towards low $40. I'll be looking to bet against this stock if the downtrend continues next week. Despite the continued growth the competition is fierce in social media space in China and growth is likely to slow down in coming quarters.

WB-03-12-2017-technical-analysis

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BZUN – Baozun Inc.

Despite meeting it's earnings expectations BZUN now trades below the channel (see chart) and is exhibiting bearish signs with the price indecision. Low $14 seems very likely for next week and it will be on the watch to see what it does after $14 test. Even though analysts have a price target of $18, I see no reason why it would go there if it can't break $16 with strong volume.
BZUN-03-12-2017-technical-analysis


SINA – Sina Corporation

$67.50 seems to be the short term battleground for SINA and we will be closely watching to see if that support can hold next week. As Elasticity goes below 0, we're looking to see if it continues to move further away from 0 to start a position on the short size. SINA-03-12-2017-technical-analysis


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Alright, That's it for now folks. Happy and Profitable trading for next week!

To Learn more about how to use and take advantage of our proprietary gauges; i.e. - Berserker, Elasticity, Flux, and Social... watch the instructional videos we created on our howitworks page.

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Image credit - europe.chinadaily.com.cn | disclaimer.

Saadey (साँढे)

compsci background, high perf software engineer by profession, fintech fanatic, entrepreneurial, food lover, soylent, traveler, NBA fan, geek, and avid learner.

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