Category Archives: Trade Recommendation

Racing for the October 2018 High

The relentless market has surprised a lot of people on the upside.  The December selloff was painful, the rise out of the low has been equally painful.  It has caught a lot of professional speculators such as the hedge funds unprepared.  Normally the market bases for a period of time around the low, seldom it pivots so quickly that produces a V-shaped bottom.

Indeed we have a V-shaped low and it is racing to take out the October 2018 high.  The October 2018 high is a 4-year cycle high, once this high is taken out, the previous 4-year cycle low is confirmed and the new 4-year cycle low to high rising phase will last at least until November 2020.  As we blogged before, we are currently in the middle of a 17-year cycle that is similar to the period of 1982-2000.  This December 2018 low is a 4-year cycle (February 2016-December 2018)  low and a half cycle low of the 17-year cycle (2009-2026).  We have steadfastly maintained a long term bullish outlook.  We have been looking very hard for entry points to deploy fresh capital for investment opportunities.  The indices continue to blow out resistance levels and now are marching for the old high.

It is 14 weeks into the current weekly cycle and it is very close to the old October 2018 high.  We still maintain the stance that the market is not going to breakout from here and enter a point of no return zone.  It will encounter resistance at the old high and enter a correction to reach below for the 200-day moving average. Back in October 1998, it made a 22.45% correction in 11 weeks to produce a 4-year cycle low, then it only took 7 weeks to take out the old July 1998 high, which was  a 4-year cycle high then.  The October 1998 4-year cycle low was confirmed in 7 weeks.  It then entered a point of no return zone to create the dotcom bubble.  This time it has spent 14 weeks already and it still hasn’t taken out the October 2018 high yet, and we are not foreseeing a dotcom bubble in the next two years, therefore this December 2018 low is very similar to the March 2009 and February 2016 lows.  It will experience a correction to provide entry points.

We have identified a few growth oriented investing ideas that are still in the early investing cycle.  We have conviction in these three companies that will be disruptive forces in the coming 4-year cycle.

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A Furious Bear Market Rally

We just witnessed a furious bear market rally in 16 trading days.  The DOW rallied 14% in 16 trading days but it failed to produce a weekly reversal signal in the maximum allowed time length of 3 weeks against the December low.  The weekly reversal signal is needed to enable the market to continue to move up from here.

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The Canadian Marijuana Stocks Fever

The Canadian marijuana stocks are raging based on the fact that Canada is going to legalize the recreational marijuana use nationwide.  Also the alcohol industry is circling around the pot industry.  Constellation Brands, Inc. (STZ) just announced 4 billion dollar investment in Canopy Growth (CGC).

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Update on AI Play $SOGO

The US listed Chinese stocks just had two months of brutal selloff!  The good earnings didn’t matter.  Everything was sold because of the trade war scares.  $SOGO was not exempt either.  Despite all the negatives, we would like to take a closer look of $SOGO. 

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Nasdaq Is Breaking Out–The Amazon Era

While both the DOW and S&P 500 indices are trapped below the all time high that was establish in January 2018, the Nasdaq ignored all the noises and made three more all time highs since January 2018.  We can’t ignore the fact the numbers are speaking loud and clear that the winners are still with tech!

A few major banks released earnings last Friday, but failed to ignite the banking stocks.  The banking sector is in solid bear territory.  The stock price performance is ranked 139th out of 197 industrial groups.  The semi sector is in equally a bad shape.  These two major sectors are needed in order to have a broad bull market.  Maybe these two sectors will pick up later as the market clears out the noises, but right now the winners are with Nasdaq.

The Nasdaq outperformed every other indices with an impressive gain of about 13% for the year.  The QQQ ETF had 10.61% YTD return.  The QQQ’s main holdings are the high flying names such as the FANG stocks, essentially the Nasdaq 100 is the FANG stocks.  Despite all the noises, Amazon and Netflix had no trouble at all making new highs after new highs.

It’s extremely difficult to find the fair value of Amazon or Netflix.  These two companies don’t show any sizable net profit relative to their revenue, but the street has been sold by their vision and storytelling.  Amazon and Netflix changed the rules of the game, no profits, not problem.  It’s deja vu all over again like the dot com bubble era.

Better yet, we are at the eve of a new industrial revolution–artificial intelligence.  So the bubble is only at the very beginning stage.  For sure, we are going to have a tech bubble in the next few years surrounding the AI area.  The multi-year easy money policy created bull market is not going to die off so easily, without a bull trap to destruct all the wealth accumulated before the bubble.

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