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.)

All posts and charts are for educational and illustration purposes only

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.

All posts and charts are for educational and illustration purposes only

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 

All posts and charts are for educational and illustration purposes only

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 

All posts and charts are for educational and illustration purposes only

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

All posts and charts are for educational and illustration purposes only

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

All posts and charts are for educational and illustration purposes only

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

All posts and charts are for educational and illustration purposes only

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.

All posts and charts are for educational and illustration purposes only

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.

All posts and charts are for educational and illustration purposes only

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 

All posts and charts are for educational and illustration purposes only

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

All posts and charts are for educational and illustration purposes only

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

All posts and charts are for educational and illustration purposes only

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

All posts and charts are for educational and illustration purposes only

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

 

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One of the Beneficiary of Global Chip Shortage (SMIC: 0981.HK)

 

SMIC (0981.HK) just broke out from its long-term down trend after a one-year consolidation.

Recently, hit a resistance at 27.90 and has pulled back.

A break above 27.90 will see the price move to the next target at 31.40 and move towards the second target at 32.92.

 

The company will be reporting results on the 05 August 2021.

All posts and charts are for educational and illustration purposes only

Chinese Big Tech Companies Got Crushed - It is time to bottom fish?

CSOP HSI Tech Index ETF (3033.HK) traded at a low since listing in August 2020

The CSOP HSI Tech Index ETF (3033.HK) listed in Aug 20 (as shown in Figure 1) and has traded below its year low today.

The ETF is mainly comprised of heavy techs like Alibaba, Tencent, Meituan, Jd.com, SMIC etc, China’s ongoing regulatory agenda against the internet sector in China, be it over monopolistic market positioning or control of data has contributed to the dismal performance China’s Tech sector and the divergence between the US Big Tech share has become extreme.

China’s crackdown US listed China tech companies like Didi and private tutoring has significantly unnerved financial markets with a 6% drop in the CSOP HSI Tech Index ETF and a 4% drop the HSI index today (26 July 2021).  

Figure 1: CSOP Hang Seng Tech Index ETF (3033.HK) Broke Its Year Low Since Listing on August 2020

I’ve received many questions whether this is the right time to bargain hunt on these Chinese big Techs, let me share my thoughts.

 

So why is the CCP suddenly acting against all these big techs?

 

China is waking up to fact that data is the new gold, and it needs to institute rules to accumulate, govern and share it. CCP makes decisions based on what they think is in China’s best long-term strategic interests in achieving its economic growth, reduce the gap between the rich and the poor and the control of China consumer data which is deemed crucial to the China’s national security.  

 

If you are a big tech company in China, you must know who’s the Boss and that the Chinese state’s strategic priorities will take precedence over corporate interests to a greater extent than in the past.  The CCP is likened to be like the emperor and its decision is like the emperor’s edicts, obey and you stay alive, and disobedience will almost be the end. The blunt assertion of the state’s interests over private enterprise in China also raises the risk premium of investing in Chinese assets.

 

In order to reduce inequality and promote sustainable economic growth, China needs to ensure competition is sustainable and it means you cannot win by creating a artificial monopoly and if you win it must bring tangible benefit to the Chinese consumers. Alibaba and Tencent is a good example of company that infringed on these rules. The days of free play for the Chinese techs are over, they are likely to grow their business under a strict regulatory guideline which means their future earnings will be hurt and it will ultimately hurt their valuation, and this is precisely the reasons why Cathie Woods has been selling Chinese techs on fear over a “valuation reset”.

 

Is it time to jump in?

In the short term, there’s going to be volatility as the crackdown is clearly showing no sign of abating and it will take time to play out. I believe this clampdown by CCP is long term positive for China Tech because it will enable them to grow at a sustainable pace although I would agree that it is a short-term negative.

 

Am I still bullish on Chinese Tech stocks?

 

Well, I think the potential of these stocks are enormous. If you are a short-term investor, you need time your entry well, however if you are a long-term investor (3-5years horizon) this could be a great opportunity to start dollar cost averaging on these stocks.

 

Many of you who have been following me know I have been very successful with timing the market with my charts, so what does the chart say?

 

Let me just share the Alibaba and Tencent Trade Plans:

1.    Alibaba Trade Plan: First called a Sell on Alibaba (11 November 2020)

On 11^th of November last year, I called a short on Alibaba based on my trade plan. It has since hit all the targets on my trade plan (as shown in Figure 2).  

 

Figure 2: Alibaba (9988.HK) 

2.    Alibaba Trade Plan: (27 July 2021)

Alibaba current trading at 191.76 (at the point of this write up).

According to my trade plan, the key support that offers a good entry level is between 172 – 182 levels while 212 – 230 levels post a huge resistance. Turn long term bullish only when the price breaks above 230.

3.    Tencent Trade Plan: (26 July 2021)

Tencent closed at 490.00 on 26 July 2021.

According to my trade plan, the immediate target could be 472 (first target), and if it breaks down further, we could be looking at targets of 425 (second target) and 405 (third target).

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All posts and charts are for educational and illustration purposes only

Xinte Energy (1799.HK) - Breakout of short term downtrend, could head for next target at 16.50.

 

A company that provides of solar energy and wind power solutions, last done 14.82.

Breakout of short term downtrend, could head for next target at 16.50. A convincing break above 16.50 could see the stock heading towards its next target at 20.00.

All posts and charts are for educational and illustration purposes only

Bullish Long Term View on Crude Oil (Stay bullish on Oil stocks like Sembawang Marine, Rex International, PetroChina, Kunlun Energy etc)

 

My bullish view on the oil price and oil stocks , which as previously discussed here is likely to act as a catalyst for an escalation of the inflation scare in coming months, is based on both booming demand and, even more importantly, a growing lack of supply.

 

The One reason demand is running well ahead of supply is not only not just coming from a re-opened American economy, but also the fact that American households continue to be beneficiary of the fiscal stimulus cheques that will expire in Sep 2021.

 

Meanwhile, investment in exploration outside OPEC has been declining since 2013 when the shale boom went bust as US move aims to be carbon neutral by 2050.

 

The downturn in investment was further escalate reluctance by financial institutions to be seen funding such projects that is not climate friendly exacerbating the lack of supply. This is likely to lead to a structural decline in upstream investment.

The US Energy Information Administration’s (EIA) latest Monthly Drilling Productivity Report shows that US shale oil production has been declining month on month.

 

As discussed in my earlier post a week ago, crude oil has turned bullish on a longer term view when it broke out of its long term downtrend channel in Apr, it should be heading for its near term target at USD 75 and 83 in the medium term

 

Stay bullish on oil stocks like Sembawang Marine, Rex International, PetroChina, Kunlun Energy etc.

My bullish view on the oil price and oil stocks , which as previously discussed here is likely to act as a catalyst for an escalation of the inflation scare in coming months, is based on both booming demand and, even more importantly, a growing lack of supply. 

The One reason demand is running well ahead of supply is not only not just coming from a re-opened American economy, but also the fact that American households continue to be beneficiary of the fiscal stimulus cheques that will expire in Sep 2021. 

Meanwhile, investment in exploration outside OPEC has been declining since 2013 when the shale boom went bust as US move aims to be carbon neutral by 2050. 

The downturn in investment was further escalate reluctance by financial institutions to be seen funding such projects that is not climate friendly exacerbating the lack of supply. This is likely to lead to a structural decline in upstream investment. 

The US Energy Information Administration’s (EIA) latest Monthly Drilling Productivity Report shows that US shale oil production has been declining month on month. 

As discussed in my earlier post a week ago, crude oil has turned bullish on a longer term view when it broke out of its long term downtrend channel in Apr, it should be heading for its near term target at USD 75 and 83 in the medium term 

Stay bullish on oil stocks like Sembawang Marine, Rex International, PetroChina, Kunlun Energy etc. 

Sembcorp Marine (SGX: S51): last traded at S$0.205.

Rex International (SGX: 5WH): last traded at S$0.19.

PetroChina (0857.HK): last traded at HKD 3.57.

Kunlun Energy (0.135.HK): last traded at HKD 6.94.

 

All posts and charts are for educational and illustration purposes only

GSS Energy - Broke out from its 6 years downtrend today. Could be heading for the following targets 0.091, 0.104 and 0.122.

All posts and charts are for educational and illustration purposes only