By: Chris Rowe — October 20, 2020
This China Trade Is a Win, No Matter Who Gets Elected
Unfortunately, folks have rebranded China, associating it with CV, or whatever Trump is harping on.
Remember a few years ago?
American investors associated China with growth opportunity. Its economic might and resilience was undeniable, and capturing the next profit opportunity was on the forefront of everyone's minds.
Let's get back to that mindset and make some money!
There's almost certainly a very strong upward reversal coming to the biggest companies on the Hong Kong stock exchange, whether Trump or Biden gets elected.
And there's a very simple way to play it.
Those are the symbols of China large-cap exchange traded fund (ETF) and it owns 50 of Chinas largest companies.
The Chinese economy is in full-on recovery mode and this basket of stocks is a great and a safe way to take advantage.
(Click any image to enlarge)
A 10% gain is a pretty big win for a general market average.
As you can see, the China fund gained 20.55% over the last two years. I think the fund gains another 20% just in the next 12 months.
Instead of buying and holding the fund, you can use a trading strategy to generate 43% - 130% on short-term swings.
Each pair of red/green arrows, on the marked-up version of the same FXI chart, represents those 43%-130% trade opportunities I'm talking about.
It comes down to personal preference on how you take advantage, but I suggest a series of bullish trades within the long-term uptrend.
Here's why I expect a large and sustainable long-term breakout in China.
The green arrows point to times when stock markets around the world were "washed out" (very oversold).
When markets become washed out, it's like pressing the "reset" button. It's basically the beginning of a new bull market. And the more recently a stock market was washed out, the stronger it's going to be.
The blue lines represent channels, which are basically trading ranges.
Once a stock market "breaks out" of those channels (green highlighted), large fund managers initiate "buy programs". They set in motion automatic, rules-based, stock purchase programs.
Other fund managers, who had been bearish short-sellers betting on price declines, exit their bearish positions by buying back stock (adding swift and immense upward pressure on prices).
Why would this happen now?
Chinese GDP expanded by almost 5% on a year-over-year basis ending in Q3 of 2020, signaling sustained economic recovery for the initial pandemic ground-zero.
Believe it or not (and I literally mean "believe it or not"), China seems to be ahead the U.S. in terms of coronavirus recovery. China posted an increase in retail sales of 3.3% in September, compared to U.S. retail sales, which grew 1.9% in September (beating +0.7% expectations).
If you're feeling confused about how to trade ahead of the U.S. presidential election, or beyond that, I think China will provide a wealth of opportunities for long-term and short-term investors.
Even if you're a short-term trader, you should be thinking about the next bigger trend. You want to buy your position when the stock or the fund experiences a short-term decline and looks like it's going to reverse back up.
Channel trading is particularly fun when it comes to FXI.
So it might come in handy for your upcoming FXI trades!
Get very paid,
Founder, True Market Insiders