What will today’s or tomorrow’s game of political chess mean for the markets? It’s hard to say with any authority. But in China large-capitalization stocks Baidu (NASDAQ:BIDU), Alibaba Group (NYSE:BABA) and Ping An Insurance (OTCMKTS:PNGAY), bullish investors are on the verge of winning the trade war on the price charts.
There will always be headline threats. And sometimes those uncertainties do turn into negative consequences. At other times those intimidation’s simply disappear or even make a sneak reappearance. The trade war between the U.S. and China exemplifies both in spades. Of course, the political battle of wills and economic supremacy has occasionally delivered bullish relief as promised, too.
Moreover, markets are going to do what they’re going to do. Ever hear of “climbing a wall of worry?” Or how about, “buy the rumor and sell the news?” The point is, despite the occasional short-comings of price charts, a visual inspection of the trade war between bulls and bears goes a long way to winning investments in the portfolio. And right now China large-cap stocks BABA, BIDU and PNGAY are in a good position to claim a strong victory for bulls.
Search and diversified tech giant Baidu is a name often referred to as China’s Alphabet (NASDAQ:GOOGL, NASDAQ:GOOG). BIDU is the first of our large-cap stocks to buy. Well-documented scandal, missteps and overly-optimistic expectations over the last couple years have established a major correction in BIDU stock. But the game is changing for Baidu investors.
On the heels of a stronger-than-expected and well-received earnings report, a meaningful bottom centered on BIDU stock’s long-term 62% Fibonacci level appears to be in. Following an upside price spike, shares have been pulling back the last couple weeks to form a constructive test of this well-watched technical level and post-earnings reaction low.
BIDU Stock Trade: For this China large-cap stock I’d suggest buying a confirmed low within the consolidation pattern. Right now, a move above Thursday’s high of $116.91 would trigger a purchase. To contain risk I’d elect to give BIDU stock some room. I’d advise a $10 stop beneath $106.91. There is a price gap to consider and stochastics aren’t yet signaling a low. As well, this exit works out to a reasonable 9% for a name well-positioned for a big-time turnaround off and on the price chart.
Alibaba, a company likened to Amazon (NASDAQ:AMZN), is our next China large-cap stock to buy. According to a new study from market research outfit Forrester, the tech giant is close to overtaking Alphabet in the global battle for cloud computing dominance. That would put BABA right behind Microsoft (NASDAQ:MSFT) and inching closer to an eventual challenge of Amazon.
BABA looks great elsewhere, too. Even a long-awaited and cautioned secondary in Hong Kong, which just raised $11 billion, hasn’t kept shares down.
And that leads us to Alibaba’s monthly price chart. After a sizable rally into early 2018, an equally sturdy corrective triangle has been narrowly broken to the upside. With BABA stock’s stochastics trending higher in neutral territory, 2020 presents the opportunity for a similar size leg to new highs to emerge from out of the large continuation pattern.
BABA Stock Trade: Given shares have been consolidating for the past two weeks just above pattern resistance, my suggestion is to wait to purchase this China large-cap stock through $188.28. I’d set a stop-loss below the apex near $171. For the exposure, an equal-size bullish leg could conservatively see a rally towards $275 – $300 next year.
Ping An Insurance is the last our large-cap stocks to buy. PNGAY stock isn’t a household name here in the U.S., but Ping An is a monster overseas. The company is the world’s largest and most valuable insurer. PNGAY is also one of the globe’s biggest investment and asset companies with assets nearing $1 trillion.
Technically speaking, PNGAY stock is set to become even larger. Shares have been consolidating for nearly two years. The first two-thirds of corrective work established a failed cup breakout. More recently this Chinese stock has formed a symmetrical triangle around the high of the cup and original pattern failure.
Today’s triangle could ultimately play out to the downside. But I’m optimistic PNGAY’s neutral stochastics positioning and similar pattern contraction support an upside breakout after a good deal of constructive work on the price chart.
PNGAY Stock Trade: For this China large-cap stock I’d recommend buying shares on a breakout of pattern resistance above $24.53. I’d set an initial price target of $30 for taking profits. That’s based on a conservative measured move out of the two-stage basing formation. Likewise, using an initial stop-loss beneath support at $22.90 makes sense both off and on the price chart.
Investment accounts under Christopher Tyler’s management do not currently own positions in securities mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits