IQ is a Tech-Stock That Could Benefit From a U.S.-China Trade Deal

Advertisement

To receive further updates on this iQIYI, Inc. (NASDAQ:IQ) trade as well as an alert when it’s time to take profits, sign up for a risk-free trial of Power Options Weekly today.

This morning, I am recommending a bullish trade on iQIYI, Inc. (NASDAQ:IQ), the Chinese-based online-entertainment services provider.

Last week I mentioned that there was optimism around trade talks between the U.S. and China. While those talks won’t directly affect IQ, they might benefit the Chinese economy. I also like IQ because it is a tech company, and the technology sector has been strong lately.

Overlap Between Tech and China

Last week I talked about the appearance of a “golden cross” on the tech-heavy Nasdaq. For more details on this technical indicator, I recommend seeing my previous recommendation. The important thing to note is that the golden cross has been a good indicator of short-term performance as in the past. The market has risen over the following month about 75% of the time after a golden cross forms since 1980.

IQ, being a tech company on the Nasdaq, may benefit from this, and it will also benefit from any optimism surrounding the Chinese economy. There has been a lot of concern over slowing growth in China, and a trade deal with the U.S. would likely give the country a much needed boost.

While I remain skeptical about how well-enforced any trade agreement would be, I also think any easing of tensions would be positive.

Rising Toward Resistance at $25

If we look at the daily chart for IQ, we see resistance at $25 developing. But IQ has also been making higher lows. If it moves to retest resistance at $25, the call options I’m recommending should rise in value. That means we don’t actually need IQ to overcome resistance to collect profits.

Daily Chart of iQIYI, Inc. (IQ) — Chart Source: TradingView

If the optimism around China’s economy continues to improve, investors could feel more optimistic about IQ’s prospects. A stronger economy could lead to more subscribers for IQ, and that would push the  stock higher. For that reason, I’m recommending a bullish call option on IQ this morning.

Buy to open the iQIYI, Inc. (IQ) June 21st $25 Calls (IQ190621C00025000) at $1.60 or lower.

Follow our Facebook page to receive each Trade of the Day direct to your News Feed — and join the conversation.

InvestorPlace advisor Ken Trester brings you Power Options Weekly, which delivers 5 new options trades and his latest trading advice to you each Friday. Trester has been trading options since the first exchanges opened in 1973 with a winning streak that goes back to 1984 with money-doubling average annual profits since 1990.


Article printed from InvestorPlace Media, https://investorplace.com/2019/04/iq-is-a-tech-stock-that-could-benefit-from-a-u-s-china-trade-deal/.

©2024 InvestorPlace Media, LLC