For the past few weeks, it’s felt like we’ve seen nonstop news about regulation on Chinese stocks, and the bad headlines just keep coming…
Back in July, Beijing pulled rideshare company DiDi Global Inc. (NYSE: DIDI) from app stores over alleged cybersecurity concerns
And earlier this week, another round of regulations came down on online video gaming.
The new Chinese gaming crackdown will limit kids under the age of 18 to just three hours of gameplay per week.
Access to their games will require name verification and the time is cut into one-hour chunks on Friday, Saturday and Sunday…
And I thought my parents were strict!
But as weird as it seems, the markets don’t seem so worried…
Mr. Market Shrugs off the Chinese Gaming Crackdown
After opening down on Monday, the world’s largest video game vendor, Tencent Holdings (OTCMKTS: TCEHY) gapped up at the open for the next two days straight.
At its peak, shares gained over 13% by mid-week for China’s gaming kingpin!
What kind of voodoo is this?
Well, there are three forces at play here… First off, the company has been beaten down hard (46%) from its February highs, and we’re just two weeks removed from a 52-week low.
Next and most important, the under-16 segment represents the tiniest of fractions of their bottom line — less than 3% total.
And third, the regulations could have been worse. Yeah, this is harsh, but nowhere near as bad as it was in 2018 when Beijing suspended approvals while they overhauled regulations.
Even with the headline fatigue, another Chinese gaming crackdown is a lot of risk to brush off…
But if you’re the kind of degenerate who can’t resist the urge to buy a lotto ticket on a gaming stock, my advice is this: Pay attention to institutional order flow in options instead of the headlines. On Tuesday, we saw big spenders taking flyers on esports stock Skillz Inc. (NYSE: SKLZ) in the September monthly $12 strike calls.
Check out the video below for more thoughts on the Chinese gaming crackdown from the last round of headlines. Don’t forget you can follow me @LanceIppolito on Twitter, Instagram and our YouTube channel for more trading insights and tips. And as always, you can find me right here talking stocks and options trading — and printing money — on WealthPress.com!
P.S., What if traders knew — down to the exact day — when a single stock was going to explode by 100%, 150% or even 200%?
Think about that…
What if someone could count down to a date and sit back and watch as a stock shoots nearly vertical?
Most folks don’t believe that type of market timing is possible.
But thanks to an odd market event I call a “breakout date…”
It’s completely possible… I’ve already seen it happen — and cashed in.