Selling the U.S. and Buying China??

JC Parets
January 18, 2021

It's not a secret that Chinese Tech stocks have been breaking out all over the place to new all-time highs. We've been on this for a while. I remember specifically in the depths of the market crash in March last year, Chinese Technology was actually breaking out to new multi-year highs relative to the S&P500. This was happening during the worst part of the crash!

I remember thinking, "What the heck???"

And so they've been ripping ever since. But the market had already tipped its hand.

The difference today is that we're now seeing signs of structural outperformance. It's now Chinese Technology leading the way here bigger picture, no longer U.S. Tech.

Here's the Chinese Tech Index Fund $CQQQ breaking out of a mulit-month base to new all-time highs. You'll also notice how it's breaking out relative to the U.S. $QQQ representing the Nasdaq100 Index:

Comparing Apples to Apples, here's Chinese Tech vs U.S. Tech breaking out to new multi-year highs. This ratio is back above those key 2012 lows and if that's the case then China is officially the leader here, not the United States:

We've had plenty of winners already from this space, but the setups keep coming. I encourage you to dive into the components of ETFs like $CQQQ and $KWEB, or search your favorite scanner for Chinese Tech stocks.

I think this theme is here to stay a while.

(On another side note, when this CQQQ/XLK ratio bottomed last time in 2012, so did Interest Rates all over the world)

Anyway, an interesting Chinese Mid-cap Tech stock that continues to work is Daqo New Energy $DQ. This Semiconductor stock isn't a new one for readers, as it's been coming up on Conference Calls and the Under-The-Hood reports since last Summer.

But after our upside targets were hit and a 5 for 1 split, the stock is now breaking out once again. We want to be buyers of any weakness towards 63 and be long only if we're above that, with a target back up towards 100:

These Extension levels from the 2011-2012 decline keep coming into play and helping with risk management and for setting targets.

We'll stick with these levels and trade accordingly.

But again, this is just one name of many in the group that are shining. Dig into the components of the ETFs and Indexes and I'm confident that you'll find some gems that fit your specific time horizon and risk parameters.

We'll be discussing some of my favorites on tomorrow night's Live Monthly Conference Call.

JC

 

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