I love short-term trades, and the Chinese tech stock dip in the American Depository Receipt (ADR) names have presented some fantastic opportunities in recent weeks.
If you’ve been following me for a while, then you probably know all about how I bought the dip in DiDi for some spectacular results…
But as much as I love these trades, I have to be honest — they come with their fair share of risk that shouldn’t be brushed off, especially considering recent events.
Back in the good old days of a few months ago, the major risks on ADR stocks usually came in the form of short reports.
We saw this happen with stocks like Techdu — now trading as Gaotu Techedu Inc. (NYSE: GOTU), and Tal Education Group (NYSE: TAL).
At the time of the reports, those companies were trading at ridiculous valuations and short sellers called them out for good reason…
And if that’s all we had to worry about, that would be great.
Chinese Tech Stock Dip: Is It a Buy?
In recent weeks, the Chinese government has been turning up the regulatory heat on its own companies.
Earlier this month, Beijing pulled rideshare company DiDi Global Inc. (NYSE: DIDI) from app stores.
That environment is making things tough for investors to buy and hold these stocks because there’s too much uncertainty…
And fears that this crackdown will continue — or possibly get worse — has caused a major sell-off, especially in popular Chinese tech companies…
Alibaba Group Holding Ltd. (NYSE: BABA) is down over 25% since February. Momo Inc. (Nasdaq: MOMO) dropped over 35% over that same time. DiDi fell over 45% in a month…
And if you think that’s a lot, Tencent Music Entertainment Group (NYSE: TME) is down over 65% since March.
Now don’t get me wrong, I will day trade these stocks along with their major institutional order flow… But I’m in and I’m out. This is not a great time to gamble on the Chinese tech stock dip for the long haul, as tempting as it seems.
The good news is we have a ton of opportunities out there that are just flat-out better.
And if traders need to scratch that degenerate gambler itch, take a look at gambling stocks like International Game Technology PLC (NYSE: IGT) and Las Vegas Sands Corp. (NYSE: LVS). These names have pulled back in recent weeks and have exposure to international and Chinese markets — all without the threat of being shut down by Beijing.
I have a few more potentially profitable ideas for the Chinese tech stock dip, so check out the short video below to find out all about them! 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. Once SWARM triggers, all that’s left to do is place a simple trade…
And forget about it!
This repeatable strategy has dominated the market for decades.
One source says it’s responsible for “all of the positive returns to the (Dow)…”
Yes, ALL. That’s a direct quote from the research.
It’s time you learn the secret of Swarm for yourself…