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Profiting off a 60% move in Chinese Equities

Updated: Mar 5, 2023

Where does China go now?

 
 

What an absolutely insane move for Chinese equities of 60%, we dive into China's recent history since the pandemic, talk about when we started getting bullish Chinese equities and some near term targets. So far they have been outperforming the U.S. equities this year, will it continue?


We also have a very dear and special guest to me, my mother Melanie Norman, that will talk about the Lunar year and what it entails for 2023!


Please be sure to read the disclaimer on our site before moving forward, comment below and follow us on social media (Instagram, and twitter)!

 

新年快乐!


Happy Chinese New Year! We kicked off the Lunar New year on 1/22/2023:



First, let's take a look what has been going on in China and their leadership:


Xi Jinping, the current General Secretary of the Communist Party of China and President of the People's Republic of China, has continued to consolidate power over the last year. In January 2022, he proposed the addition of a new clause in the Chinese Constitution to allow him to hold the presidency beyond 2023, when his current term was due to end. This proposal was eventually passed in March 2022, effectively abolishing the two-term limit for the presidency.


Xi has also taken steps to strengthen the authority of the Communist Party over various sectors of society, including the military and state-owned enterprises. He has launched a massive anti-corruption campaign, targeting high-level officials and generals, which has been seen as both a genuine effort to root out corruption and a means of consolidating his own power. Meanwhile, the Chinese government has continued to crack down on dissent, restricting civil liberties and tightening control over the internet. The country has also taken a more assertive stance in its foreign policy, particularly in regards to Taiwan and the South China Sea.


Chinatown in NYC for the lunar New Year
Chinatown in NYC for the lunar New Year

So what does that mean for the Chinese markets?


The COVID-19 pandemic had a significant impact on the Chinese economy, leading to a sharp contraction in the first quarter of 2020. The widespread lock downs and travel restrictions disrupted supply chains and hurt consumer spending, leading to a decline in economic activity which continued into 2021 as a result of China enforcing strict lock down policies. However, the Chinese government implemented a massive stimulus package and launched a series of measures to support businesses and households, which helped to stabilize the economy. By the second half of 2020, the economy began to recover, helped by a combination of government stimulus and a recovery in global demand.


$TSM hitting 52 week lows
$TSM hitting 52 week lows - Semiconductor

Our tweet on November 3, 2022 from @essextrading on Twitter succinctly put into character the state of the Chinese markets, the biggest semiconductor company was hitting all time lows. We know very well that if the semiconductors are hitting all time lows then we need that to reverse for equities to go up.


The next day it happened, who was buying?


--> Warren Buffet


We can see here just how quickly sentiment can change as $TSM got bought up by Warren Buffett himself (announced November 14th) as he gobbled up a staggering $4.1 Billion in stock which became Berkshire Hathaway's 10th biggest position.


Berkshire top 10 Positions at the end of Q3
Berkshire top 10 Positions at the end of Q3

Better now, for sure!


We have been tracking for sometime on our feed once we saw Buffett was buying and saw that we had a potential to break lower as we saw resistance in the stock at $82 after the announcement was made (a sell thew news short term type of event). After that we carved out a nice little bottom, referred to as a "cup n' handle", and after we broke over $83 it was off to the races. It hit our initial target of $83.60 and then some!



A 59.4% move in 2 months, 2 weeks and 3 days!


Matching that of the Chinese ETF, $FXI (up +12.45 or 59.54% in almost 3 months)


Take that bank Account Annual Savings Rate of 3.0%!


We are now hitting some short term resistance and be mindful if we drop below $90. If we take this route we'd expect it to retest $83 and the daily 200 SMA.


So despite all this weakness we started noticing out performance in Chinese stocks in 2023 and the moves have been nothing short of spectacular! Let's take a look at a couple of more charts:


$WYNN, was a stock we caught much later after we noticed price was consolidating. Wynn Resorts is a luxury hotel and casino resort company based in paradise, Nevada. It was founded in 2002 by Steve Wynn and holds more Forbes Travel Guide Five-Star Awards than any other independent hotel company in the world. There resort offers award-winning restaurants, exciting entertainment and nightlife, two award-winning spas, salons and luxury shopping located in Las Vega, Macau and Boston.


U.S. Dollar hits the 161.8% Fibonacc i Retracement
Technical Chart of $WYNN Resorts

We got in and took a 16% & 24% ROI in 3 weeks!



Do see how powerful these patterns can be!?


It hit our short term target of $100 and we were looking for a potential move of $107. We increased our stops and we'll see what the market has to say.


Remember, while it's important to have predictions on where a stock can go to understand the return on our investment, its just as important to manage risk in case we are wrong!


Keep in mind -> We can always get back in if we get STOPPED out.


That's why we stay disciplined in the markets.


We limit downside risk and exponentially increase our upside with patience and risk management. Keep drilling this point over and over into your head until it becomes second nature.


We started taking profits on a lot of positions on Friday of last week in our private feed as markets were experiencing some short term exuberance. If you would like to know more please reach out to us and find what stocks we were taking profits on and what we got long.


Today it looks like that was a great idea in hindsight as the Chinese market, $FXI, is down 3% and the Chinese internet index, $CWEB, is down 8.53%. $BTC, $ETH and other Cryptocurrencies are selling off which impact Chinese markets as well. Now we will wait for these markets to consolidate and take profits into bounces instead of getting too aggressive here.

 

And now, Melanie Norman, who is a pioneer of the Culinary and Healing Arts, who has been featured in the Wall Street Journal for Feng Shui is going to give us her take of what the Lunar New Year holds in store using the Ancient Chinese Arts of Bazi (Chinese Astrology).

 

As the Solar New Year of the Water Rabbit is only days away, on February 4th, also known as Lichun, many have been asking what will happen in the Year of the Water Rabbit?


The Mother Earth Oracle is the first page of the yearly Tong Shu, the Chinese Calendar. The only Oracle that predicted the pandemic correctly was the Mother Earth Oracle, 2000 years old from the Yellow Emperor’s era, and last updated 400 years ago in the Qing Dynasty. In 2020, the Mother Earth Oracle said “Whole world will experience illness and disaster. The whole Whole World will be affected.”


In 2021, it says “Half the people will be sick.” In 2022, “People come back to normal.” “6 Types of Animals, everything disaster.” As this was a farming society when this was written, the animals represented their investment returns. In 2022 many people’s investments went down overnight losing money in their stocks, 401K retirement plans and cryptocurrencies.



What does the Mother Earth Oracle say for 2023?


1st Line: “High & Low, half worry.” “1/2 are depressed or frustrated. Rich and poor, all will be affected.”


2nd, 3rd, 4th & 5th Line: Talks about the weather: “In the spring and summer there is a lot of rain and flooding. In the autumn and winter, there is lack of water.” The erratic climate affects crop production, impacting prices, contributing to inflation. As this was written in China the impact now would be big on the global economy.


6th Line: “People have a lot of illness.” The Oracle did not say what type , but this line comes up again as it did in 2020.


7th Line: “6 Animals fuzziness, smokey and unseen.” Again this has to do with production. The current economic condition does not look good.


8th Line: “The Mulberry Trees have no leaves. The Silkworms have nothing to eat.” This means production issues again pointing to constraints in supplies.


“Their buckets are empty.” “The silk maiden carrying basket are busy weeping with sadness.” As they worked from home hundreds of years ago, this is perhaps a metaphor for many of us are working from home today.


Will our buckets be empty?


Many people will loose their jobs. We are already seeing this as thousands have lost their jobs with the Big tech companies such as Google, Twitter, Meta, Salesforce and Spotify. Sadly there is more to come.


This will divide the wealth gap even further between the rich and the poor. Have cash on hand as everything will be on sale, including stocks, bonds, real estate, cryptocurrencies and precious metals! Even have 1 or 2 side gigs to help you out in these difficult times.


Even though their buckets are empty and a lot of resource problems the only way out of this is those who are innovative and creative, especially in the fields of health, wellness and self improvement.


(If you would like more info please reach out to Melanie where she can teach you how to make more informed decisions using Bazi, Chinese Astrology or Feng Shui consultation,

to see how you can weather the storm ahead, and how you can thrive in 2023.)

 

Be sure to reach out here or on our Social media feed to ask questions and let us know how we can help you make this the best year yet! (@wizdaytrader)


Thanks for reading and remember to trade confidently!


 

Essex Trading Quote of the Day (#EsxQotD)


“Know the crowd around the stocks you’re trading.”


~ Ray Dalio

 

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