<![CDATA[In physics it's a self evident truth that what goes up must come down. While that's true in trading as well, legendary traders like Warrant Buffet base their entire trading strategy around the equally self evident trading truth that what goes down must come up (as long as it doesn't go bankrupt first!). This trading axiom is why, even as a momentum trader that is constantly in search of strength, I keep a list of beaten down sectors that are likely to eventually rise again. Today we are going to talk about my favorite beaten down area that's already showing strong signs of a rise: China.
The Beat DownChina has taken a magnificent beating. While the U. S. market took it’s plunge in October of 2018, China peaked 9 months earlier in January. Since that time it hit a recent low that had it down over 30 percent from the January high. During this period there was absolutely no reason to consider trading China to the long side unless it was for a “quickie bounce” trade.
Shift in TrendNow look at the chart again and notice the recent higher low at the arrow. This is a “higher low” that breaks the trend of lower lows. This bullish signal indicated a potential reversal of trend. Combine that with a break of the recent highs and 200 day moving average, and we see a new trend emerging. This new trend is why I am now bullish on China. Now that the China ETF FXI, which tracks 25 China stocks, is showing improvement, we dig down to individual stocks that we can trade for explosive gains.
10 Trade IdeasThe stocks and ETFs I am tracking to potentially trade all have the following characteristics:
- Beaten down to extreme levels
- Showing improving price action
- Potential bottom formations
- Remounts of resistance levels that now become support.