The business of online consumption is heating up right now, and there’s one area in particular that is really grabbing my attention: emerging-markets e-commerce. These stocks have been outperforming lately, and not only do they look great on the charts, they look good from a fundamental perspective as well.
Within that group, I’m keeping a close eye on Changyou.com Ltd (ADR) (NASDAQ:CYOU), a little-known Chinese company that finds itself in a very hot sector with several NexGen mega-trends working in its favor. I’m talking gaming, eSports, emerging markets, you name it. All of these trends look strong right now, and CYOU has found itself at the forefront.
Take a look at the chart below. As you can see, CYOU had a big run-up on solid volume in May. It spent the next couple of months consolidating on light volume, and then it broke out again on big volume in July. The shares have pulled back since then and are now consolidating at current prices just above $40 (the black line). They’re also holding near the 50-day moving average (the orange line), which is acting as an additional area of support.
There are a few other technical indicators stacking up in its favor as well. First, at the bottom of the chart you see that the relative strength index (RSI) at 10 has recently started to move higher. This could lead to an RSI crossover buy signal, which is very bullish. And it’s also encouraging that pullbacks have come on light volume while rallies have been on good volume.
Fundamentally, I like that CYOU trades with a PEG ratio of 0.5. Anything below 1 in this market is considered extremely undervalued. In addition, it has a forward P/E of just 10.
If history is any indication, this stock is gearing up for its next move to the upside. It has both the fundamentals and technicals to back that thinking up, so if CYOU isn’t on your radar yet, I recommend putting it there.
Matthew McCall is the founder and president of Penn Financial Group, an investment advisory firm, as well as the editor of FUTR Stocks and the ETF Bulletin. Matt just launched two new investment advisories focused around the “next” generation investing theme. His trademark three-prong investing approach targets the mega-trends old Wall Street is missing out on. Click here for more information on the “NexGen” Experience.