loader image

Why This Rally in Chinese Stocks Will Soon Come Crashing Down

by | Aug 25, 2021 | Uncategorized

I want to talk about China and the rally in Chinese stocks — shocker I know — but from a different perspective…

For awhile now, I’ve been right on the pulse with my prediction for U.S.-listed Chinese stocks. I was also one of the first to see the warning signs coming from the Communist Party of China before investors even realized there was a problem.

On Tuesday, Chinese tech stocks ripped higher after getting pounded down more than 40% the past couple of weeks.

So what does that mean?

It means that when assets get stressed and have major drops — like Chinese tech stocks — dip-buyers like to swoop in, hoping to make a profit if the market rebounds.

And this strategy worked well for them on Tuesday. While there’s still the chance of a bit more upside in these tech stocks, the fundamentals of the situation haven’t changed at all.

My US-Listed Chinese Stock Prediction for the Rest 2021: More Downside

The CCP doesn’t want American-style mega corporations running the state and becoming more powerful than Beijing is from a financial standpoint.

The U.S. has already made peace with the fact that companies like Facebook, Google, Amazon and Apple have inordinate power in the economy.

The resignation to this comes after the realization that these companies are also economically excellent to the average American.

The U.S. has the highest per-capita GDP in the world due to this, but China doesn’t see things that way.

China, which has a controlled economy and a nonelective system of government, doesn’t want its companies’ CEOs to become the next Jeff Bezos — who has enough money to create his own space force as a side project.  

So the easiest way to avoid something like this happening in China is for the CCP to put a lid on its own companies and their stocks… Nipping them in the bud to halt any chance of financial growth.

And this has me worried… No, this has me scared.

I fear that the CCP will take over these — and other — Chinese tech companies completely. As a trader, that means you’re sitting on a stock that was a public company that private investors owned, and it’s now a government-sponsored entity.  

That’s a horrific situation to be in.

At that point, there’s no incentive for commercial activity in the Chinese stock market — it’s almost like the CCP hasn’t thought this through… 

We’re also witnessing an interesting situation right now with China, where old (outdated) principles are conflicting with modern business practices.

And the downside that we’ve been seeing with Chinese tech stocks has only just begun… which is why I’m looking at Alibaba Group Holding Ltd – ADR (NYSE: BABA) right now.

Check out my short video with WealthPress Senior Strategist Roger Scott and learn more about our predictions for U.S.-listed Chinese stocks for the rest of 2021.
In it, we also discuss our expectations for volatility in September and October, a 5% to10% correction coming to the market and the tipping point of inflation. 

And as always, send any trading questions to jeff@joyofthetrade.com and stay ahead of the markets, especially these choppy ones, by subscribing to our YouTube channel.

WRITTEN BY<br>Jeff Zananiri

Jeff Zananiri

What to read next

99 Problems and a “Pivot” is One

99 Problems and a “Pivot” is One

A friend of mine sent me this chart about three months ago. I should probably print it and keep it in my wallet next to a photo of my daughter. Given the sheer number of questions I’ve fielded lately, I’ll probably end up showing this chart more than her picture.

read more
Everything Everywhere, Going Down, All At Once

Everything Everywhere, Going Down, All At Once

When our momentum reading went negative last week, I didn’t know that we’d have the second largest bank failure in U.S. history three days later. All I knew was that it went negative… and that we got out of the way.

read more
Trust But Verify…

Trust But Verify…

I want to talk about our version of “Trust but Verify” in the markets. Qualification is the most important part of the investing process. And this F score value strategy looks to be crushing the current market.

read more

Have any questions? Contact Our Customer Service Team