Bloomberg Commodity Index - The Commodity Super Cycle Uptrend in full swing.

Conviction buy call to signal the start of the multiyear bull run was made on 18 Feb 2021. The index has gone up 100% but the bull is still young. Next target 115 and 135.

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Crude oil prices looks set to hit 100 and the commodity index will continue to charge ahead.

Russia is world top wheat producer and Ukraine is world 3rd largest producer of corn and 4th largest producer of wheat.

 

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Alibaba (9988 HK, NYSE: BABA) will be posting their results on 24 Feb 2022 (next Thursday). What are the street expectations? What do the analysts say?

Optimistic Analysts: Overly Impacted, Accumulate Before 3Q22 Result

Alibaba shares at current price is trading at 2017 price levels even though their revenue grew 5.5 times of that in 2017. Optimistic Analysts believe that Alibaba's current P/E for Fiscal 2022 (ending March 2022) at 15.9x is trading twice lower than the average P/E from 2017 to date at 31.3x.

Another more conservative method in valuing Alibaba shares to measure Alibaba’s P/E average before the pandemic (from Alibaba’s IPO to 2019) at 26.9x which is 68.5% higher than the P/E 2022.

As such, using the above valuation matrix above, Optimistic Analysts believe that the correction in Alibaba shares is over with a 68% upside potential target price of US$206.

In addition, they expect Alibaba’s revenue to grow 14% YoY in Q3, 2022 and 22% YoY for FY2022 with operating margin to stabilise (between 22.4-22.6%) over the next two years, as the group continues to dispose non-profitable business (i.e. Possibility to sell part of their media holdings Weibo Corp (HKEx: 9898, Nasdaq: WB)).

Pessimistic Analysts: But, The Street's Most Pessimistic Forecasts on Alibaba Have Been Right

Pessimistic analysts view that Alibaba average consensus price targets (PT) have often been "too optimistic" over the past three years. It seems that BABA stock has trended closer to its most pessimistic price targets (PT), notably since BABA stock's November 2020 peak. Moreover, Alibaba's PT has also been revised downwards consistently, as its fundamentals have gotten worse as China's economy continues to slow.

In addition, Alibaba's reducing margins and investments in lower margins businesses have contributed to their consistent deterioration and diluted margins over the last three years.

Amid macroeconomic impact from China's slowing growth coupled with the need for more aggressive investments to fend off competition and develop new long-term growth drivers, pessimistic analysts believe that Alibaba lack a near term catalyst and there aren't enough near-term catalysts to turn more positive over its medium-term outlook yet. They believe that there is still a period of digestion for Alibaba until its revenue estimates reach a bottom.

They think it could come nearer to the end of 2022, as certain macro headwinds could start to unwind. These include the supply chain disruption and regulatory clarity.

The most pessimistic PT for BABA stock is $140, representing a 14.5% implied upside.

But, if you take a meaningful discount to account for Alibaba stock headwinds, then it's at most fairly valued, if not overvalued.

Therefore, pessimistic analysts encourage investors to remain patient for more data points before jumping into Alibaba stock again.

Moreover, the growth stocks correction in the US market has presented a plethora of alternative opportunities to consider. So, they believe that there's no need to rush into Alibaba stock for now.

Source: Smartkarma/Seeking Alpha

(Disclaimer: the above is for informational purposes subject to errors and omissions, and does not constitute an offer to sell or a solicitation of an offer to purchase any financial instrument.) 

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US Dollar Index - One Year Rally Could Be Over!

Macro Trend Cycle was hit at 94.5, get set for the down trend cycle which will see dollar crash to 92.00.

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JD.com drop 9pct - time to accumulate ?

Tencent Holdings “send Christmas gifts” to shareholders as it announced it will distribute the JD Group’s class A ordinary shares to share holders in kind as a interim dividend. JD.com shares fell 9 pct. This is Tencent strategy to distribute dividend via JD.com shares, it does not mean that JD.com fundamentals have worsened. This distribution will bring selling pressure in the short term but it could also help expand its shareholder base thru Tencents core long term investors. After the move Walmart will be JD.com largest shareholder. 

Amongst the China internet stocks that have been plummeting this year , I actually like Jd.com. The overall crackdown on monopolistic practices by tech companies have made JD.com benefit, as the recent Single Day Sales saw JD.com dwarfed Alibaba's sales growth this year, with JD.com Singles' Day total GMV sales growth on its platform jumping 33% in 2021 compared to Alibaba’s 14%.

Even though Alibaba grew 14% sales growth of Singles Day, the growth is considered a significant slowdown compared to its 93% sales growth in the prior year.

Another driving catalyst of JD.com’s future long-term growth is the emergence of “digital yuan”. Currently there are about 300 million “unbanked” adults in China, with the digital yuan these group of people would be integrated into the digital economy. Given that an average Chinese consumer spends about US$3,000 a year on e-commerce platforms and if this people starts to spending even half of it (US$1,500), this would about US$450 billion worth of e-commerce consumption.

Accumulate JD.com  for the rebound between 236 to 247 .

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Russell 2000 - Is Another 2020 Covid Pandemic Style Crash Coming? The Current Price Action Is Looking Similar to The Price Action Before the Crash Happened in March 2020.

Before the last market pandemic crash in March 2020, the Russell 2000 index had been consolidating for about a year from Feb 2019 to Feb 2020 before taking the plunge in March 2020. The index suffered a 42% decline within a month’s period.

The current price action pattern seems to bear some resemblance to that of 2019, the Russell 2000 has been consolidating within the 2121 to 2173 range since February 2021, made an attempt to break out of the range in November 21 but failed and this price action is eerily similar to the pattern prior to the 2010 pandemic crash.

Recently, I have posted another bearish price action on index exhibiting a weak divergence from the Dow Jones Index.

For those with high risk tolerance, I liked the Direxion Daily Small Cap Bear 3x (TZA) – Leveraged Inverse ETF, the chart seems to be poised for a macro technical breakout. I have also been sharing this trading idea with my inner core group.

Direxion Daily Small Cap Bear 3x (TZA) – Leveraged Inverse ETF

Seek daily investment results, before fees and expenses, 300% of the inverse (or opposite), of the performance of the Russell 2000 Index.

As for those wanting to take unleveraged inverse position on Russell 2000. You could look at the RWM ETF.

Proshares Short Russell 2,000 -1x (RWM) – Unleveraged Inverse ETF

ProShares Short Russell2000 seeks daily investment results, before fees and expenses, that correspond to the inverse (-1x) of the daily performance of the Russell 2000 Index.

Chart pattern and prices action tends to repeat itself and if you believe there will be impending crash coming in the Russell 2000 index, you may look into inverse Russell 2000 ETFs that enables you to profit from the potential downside.

(Disclaimer: the above is subject to errors and omissions, please refer to actual announcement for accurate details. The above is for informational purposes and does not constitute an offer to sell or a solicitation of an offer to purchase any financial instrument.)

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During the recent market outlook about two weeks back, I shared an interesting phenomenon I discovered on my trade plans for Dow Jones and S & P 500. 

Both charts were pointing towards a topping out pattern, reinforcing my conviction that a major market  correction is near the horizon.

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Nasdaq 100 Could Have Topped Out at 16,764.

Yesterday's Price Reversal followed by 3 days of volume surge signals more weakness to follow.

Trade Plan:

Short below 16,380

1st Target: 16,175

2nd Target: 15,720

3rd Target: 15,250

Cut Loss: 16,820 

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Sinopec (0386.HK) set to benefit from rising energy demand.

Crude oil prices reached close to 2014 peaks after the OPEC+ group of producers stuck to its planned output increase rather than pumping even more crude on Tuesday.

Numerous natural events happening across the globe (a freak winter freeze in Texas, lightning strike in Louisiana and hurricanes along the Gulf Coast) have conspired to disrupt production and raise prices of essential chemicals.

Sinopec (0386.HK) being a crude oil and chemical producer is likely to be a beneficiary of rising crude oil and chemical prices.

The stock has since broken out from 3-Year Downtrend!

Last done at 4.06.

Next target 4.09

Second Target: 4.37

Third Target: 4.70

Stop Loss: 3.70 

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PetroChina (0857.HK) Breakout from 13 year downtrend!

Last done at 3.97.

Next target: 4.35

Second Target: 4.75

Third Target: 5.11

Fourth Target: 6.30

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Stagflation scare is coming, get ready for it!

A stagflation scarce not seen since the 1980s is coming and we need to be prepared .

Financial Times article: “Italy’s poor households feel the pain of surging energy costs”, 27 September 2021)

Bed Bath&Beyond stock (NASDAQ:BBBY) plunged nearly 25% in Thursday’s trading as supply chain issues dented its second-quarter sales and forced the retailer to cut its annual guidance.Prices of raw materials rose, and coupled with higher freight costs, ate into the company’s profits.

Italian Prime Minister Mario Draghi on Thursday (23 September) announced measures worth three billion euros to keep gas and electricity bills down this winter as power prices soar across Europe.

“In the absence of government intervention, in the next quarter the price of electricity could increase by around 40%, and that of gas by 30%,” Draghi said.

We can expect for govt intervention globally to help consumers weather the effect of inflation.

Natural gas prices in America and Germany have now risen by 117% and 355% year to date, while the China thermal coal price is up 78%

A severe drought in Brazil is set to ravage orange juice, sugar and coffee adding to food inflation woes .

The energy crisis has prompted U.K. Prime Minister Boris Johnson to put the army on standby to ease shortage. China is so worried about the winter that it ordered energy companies to buy up supplies, no matter the cost.

We can also expect the Fed to stick to their lines that inflation is transitory quoting it’s because of the “special circumstances “ that the world is facing and it will blow away soon . Don’t believe it !

While the Fed is “ kicking the can down the road “ and not doing anything to stop inflation , the world is suffering the collateral damage to economic growth, and households’ real incomes, caused by the ambitious energy transition. The global green effort to curb carbon emission is causing a worldwide shortage of energy at a time the world is reopening from Covid pandemic

The energy crisis has prompted U.K. Prime Minister Boris Johnson to put the army on standby to ease shortage. China is so worried about the winter that it ordered energy companies to buy up supplies, no matter the cost.

The Chinese government measures to reduce energy consumption are having a dampening impact on growth , power shortages in China have already spread to 20 provinces as they race to meet emission targets before the Winter Olympics in February 2022 .

The continuing evidence in both America and Eurozone of labour shortages, when combined with the energy price surge, is making another inflation scare seem ever more inevitable and in irreversible at least until mid 2022. This should reactivated the cyclical trade in terms of a renewed outperformance of value over growth and by logic be negative for high multiple growth stocks particularly the overvalued tech stocks in the US market . Stay away from overvalued tech stocks for now !

I think the world is caught flat footed this time with the green effort backfiring and the Covid pandemic had added to the problem . What an ironies , the world is faced with a shortage of the second most abundant element of supplies and there is no easy way out , we need to be prepared and bite the inflation bullet .

By: Robin Ho

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ISDN.SI - Long Term Bearish Price Action (Double Tops) Broke below 50 and 200 MA and The Long Term Uptrend Channel

Trade Plan

Last done 0.635

1st tgt  0.615

2nd tgt 0.565

3rd  tgt  0.535

4th   tgt  0.45

 

Add Short at 0.635

Cut loss 0.695

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Dow Jones bearish break down today!

After close to 17 months uptrend, DJI finally breakdown of its long-term uptrend channel and below its 50 days Moving average.

Last traded at 34,577.57

Next targets 33525 and 31100 represent a good 3 and 10 percent downside potential represented by the 2 targets in the short term.

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China Internet Sector - Time For Bottom Fishing ?

China internet vs US internet, tales of 2 market . The KraneShares China Internet ETF (KWEB US) vs the US Internet ETF (FDN US) divergence is the biggest since 2016 exceeding even the last significant divergence in 2018.  Just looking for a rebound in KWEB to its 50-day MA would imply 15% upside and a move back to its 200-day MA would imply 49% upside. JD.com (JD US) and Netease (Ntes) display the clearest evidence of stability, bottoming price action and relative strength amongst the china internet stocks following the decline off the February highs and are presented as preferred buys.

 With such unprecedented divergence some analyst are saying the Chinese internet sector is undervalue but is it time for investors to start ploughing into the market? President Xi Jinping’s

new slogan of “Common Prosperity For All” is throwing into question what new regulation will China add to achieve equal wealth distribution and Xi’s calls for higher taxation

has raised concerned making money  could  be politically sensitive. Internet companies, which have been designated as so-called “key software enterprises” (a category including Alibaba

and Tencent), have enjoyed beneficial corporate tax rates of 10% since 2008. Other companies pay a rate of 25%. There is a strong possibility that China Internet companies honeymoon period of 10% taxation may sooner than later be over. As long as investors fear that the China’s regulators are not finish with new requlations  the China internet will need to wait a little longer before bottoming out. September being a traditionally weak month for emerging markets does not support a reversal of fortune in this sector. I believe the seasonal factor points to a Oct – Nov rebound.

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SGX (SGX: S68) Price Weakness Is Likely To Persist In The Short-Term.

 

SGX is trading at day low while most index stocks are up on a positive day.

Fund managers are likely to avoid this stock in view of HKEx (0388.HK) announcement yesterday that MSCI China A 50 Connect Index futures to commence trading in the month of October 2021, which is a competing product to FTSE China A50 contract traded on SGX.

SGX weakness is likely to persist in the short term.

SGX last traded S$10.22.

First Target: S$9.81

Second Target: S$9.34 

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Hang Seng Trade Plan (18 August 2021) - Last done 25,867

 No Sign of Strength - Could test 25,000 and 24,000 in the next month.

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Frencken Group (SGX: E28) - Strong Stock With A Bearish Price Setup

1. The stock has broken key support level with high volume at S$2.21.

 

2. Contra Phenomenon

Traders chased the stock on 05 August 2021 betting that it would continue to break new ATH were caught as the stock retreated below its support at 2.21. 

The huge volume traded on 05 August has created a supply situation that could dampen the price in the next two to three days due to the contra phenomenon.

First target: 2.09

Second target: 2.00

Third target: 1.93

Stop loss: 2.30

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Sunpower (SGX: 5GD) – Broke its 18-months Uptrend!

 

Could be heading towards the following targets:

First target: 0.60

Second target: 0.55

Third Target: 0.48

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Hong Leong Asia has broken its 9-month Uptrend!

 

Could be heading towards the following targets:

First target: 0.86

Second target: 0.80

Third Target: 0.73

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Sunny Optical (2382.HK) - Poised to break above its all time high!

 

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