by Dr. Chris Kacher
Looks as if the trend following wizards went the wrong way in January 2019: http://www.automated-trading-system.com/trend-following-wizards-january-2019/China Trade Talks
Despite all the hot air and promises, trade talks with China may come to a positive resolution, at least in a preliminary manner. Both countries have started to outline a deal to end the trade war. President Trump has already said the March 1 deadline could be extended. This is important since the extradition hearing for the Huawei CEO is March 1 which could cause some turbulence. While Trump could extend the deadline on the hike in tariffs against Chinese goods, Trump could instead decide to increase tariffs on some but not all of the proposed goods to intensify negotiations. So keep in mind any position in a Chinese stock could be volatile. Taking quicker profits swing trade style may work well in this still uncertain environment.
BABA and HTHT are through their 200-dmas. YUMC gapped up twice on strong earnings reports and had a pocket pivot to new multi-month highs. We put out reports on two Chinese names, HUYA and MOMO, due to positive price/volume action on both. BZUN is just above its 50-dma. A number of other Chinese stocks have bounced off lows, though are still trading under their respective 200-dmas. Still, a number have had pocket pivots as a result of pending positive news such as JD, NIO, and WB. One would still be better off buying on constructive weakness, especially in this news-driven group where what is said is typically a game of fear vs. hope.
Stocks
So as the market continues its uptrend, the Market Direction Model remains on its buy signal with the trend intact, though will continue to use wider bands so as to remain in any prolonged, albeit, sloppy uptrend.
On Wednesday, we sent out a report on NVTA. We suggested one may wish to wait for constructive pullbacks, intraday or otherwise. Later that same day, NVTA pulled back to 18, closer to the lows of its gap up low, offering an entry point. It finished the day at the top of its trading range. The tricky part of course is the market is somewhat extended, so this could have been the start of a pullback of sorts for the major averages and thus stocks. We have seen how some names that gap higher reverse and close the gap, thus avoided adding them to the list. Nevertheless, in the case of NVTA, it would be understandable if you refrained from buying on Wednesday’s intraday pullback, but Thursday gave another entry opportunity when it traded as low as 17.74.
Stocks such as VIAV are extended so profit taking may not be a bad choice.