China Breaks Out - Quick Note

Premium Section: Ways to Play the China Trade

We are back in a Swing Trader’s Market, and the conditions are right to make oversized returns in key individual stocks. On Monday, we identified numerous stock setups and notified our Founding Members on our Discord channel. The clip below shows our notifications for NVDA and TSLA, which are up 4% and 8% for the week, respectively. We also provided posts on AAPL, ADBE, META, and more. Our goal is to be a top resource for swing and position traders!

On another note, our 4Q2024 Cycle Forecasts will be available at cyclesedge.com this Friday.

China (FXI): The Chinese stock market broke out to new highs for the year, driven by China’s emboldened easy monetary policy aimed at supporting the country’s waning growth and prolonged real estate sector slump. The Chinese government reduced a key short-term interest rate and mortgage rates while lowering reserve requirements for banks, effectively injecting $114 billion of liquidity into the financial system. As a result, FXI was up almost 10% yesterday and 15% for the week.

We have another example of Economic Fuel, which can really move markets. Unfortunately, if you are not yet invested in Chinese equities entering now would not be a great risk/reward. So what can you do? The Commodity Channel Index (CCI) indicator is way overheated. Historically when the CCI hits the 200 mark a pullback or consolidation occurs. It is currently at 480, hinting that some cooling off is in the cards.

Here’s how to play it:

• Cycles: Notice how FXI really follows it’s cycle brackets. Knowing this, we can expect a pullback and possible entry the next time the cycle bracket renews around 10/17. Normally the market weakens as the cycle bracket ages and begins to slope down, which could point to 10/9 as the beginning of profit-taking.

• Episodic Pivot: If one believes that the economic fuel will power FXI higher and the upswing can last until 10/9 one can set up an Episodic Pivot trade. That means to buy any intraday weakness and set a stop-loss order below yesterday’s low, below $29.28.

• The Golden Pattern: This is a fancy name for the good ole breakout retest. Using this technique one could be ready to buy when the May 2024 high is retested at $29.53.

• Buy the 5 EMA: The 5 Exponential Moving Average (EMA) often catches pullbacks in the hottest stocks and ETFs. It is currently at $28.13 and this could be a decent level to buy.

In the Premium Section we’ll go over two other ways to play the China trade.

Disclaimer - All materials, information, and ideas from Cycles Edge are for educational purposes only and should not be considered Financial Advice. This blog may document actions done by the owners/writers of this blog, thus it should be assumed that positions are likely taken. If this is an issue, please discontinue reading. Cycles Edge takes no responsibility for possible losses, as markets can be volatile and unpredictable, leading to constantly changing opinions or forecasts.