3 Chinese Stocks to Buy That Are Poised for New Highs

Chinese stocks - 3 Chinese Stocks to Buy That Are Poised for New Highs

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It was a less-than-stellar Super Tuesday for the broader markets. Yet there are reasons to prepare for a market vaccination of sorts in the coming days. And one spot to profit from this potentially healthier change is in large-cap Chinese tech stocks. Against all odds, these companies are ready to make new highs today.

Just when it appeared Wall Street could be recovering from the worst five-day selloff since 2008, the S&P 500 got a case of cold feet. Shares of the broad-based index fell 2.84%, while taking back more than 75% of Monday’s massive rally. From an ever-persistent and still-growing coronavirus from China, to jitters in front of Super Tuesday’s key Presidential primaries, the blame game was alive and well.

But it may have been the Federal Reserve’s well-intentioned emergency rate cut that was the final straw for bullish investors.

Tuesday’s drastic move appears to have spooked rather than calmed investor’s nerves, which are still on edge following last week’s panic selling. Still, is this the time to stuff cash under the mattress in fear of a full-fledged bear market?

Maybe.

Yet with history as our guide and given the ferocity of the markets decline, it’s also important to monitor the stock market for a bullish follow-through day (FTD). A follow-through day typically occurs four to seven sessions after an intermediate market low is established. And what’s required is very simple. At its core, one or more markets need to rally by 1% or more on heavier volume during this critical window of time.

So, why is this important? The signal is as robust as investors can find on price charts. In fact, every single bull market has been preceded by this event. And entering Wednesday, the FTD count is at day three.

As such, here are three leading Chinese stocks whose price charts are doing a very healthy job of fighting off the coronavirus and showing superior technical readiness to lead the markets higher. And if you’re not seeing the irony in these stocks to buy, respecting healthy-looking price action and participating in potential big-time risk-adjusted profits still looks like a good policy.

Chinese Tech Stocks to Buy: Alibaba (BABA)

Chinese Tech Stocks to Buy: Alibaba (BABA)
Source: Charts by TradingView

Alibaba (NYSE:BABA) is the first of our leading Chinese stocks to buy. Often labeled China’s Amazon (NASDAQ:AMZN), BABA stock has been doing a technically admirable job of holding a “high handle” pattern formed around its 2018 all-time-high and starting point for shares 1.5-year cup-shaped base. In fact, right now AMZN stock could take a lesson from Alibaba’s superior price action.

And there’s more too.

Within the handle’s construction, Alibaba has put together a double-bottom test of the larger base’s mid-pivot. Along with an oversold stochastics setup, this pattern looks even more compelling. Therefore, BABA is a stock to buy if shares can hold their pattern low and clear last week’s high of $213.08 with a follow-through day signaling.

JD.com (JD)

JD.com (JD)
Source: Charts by TradingView

JD.com (NASDAQ:JD) is another Chinese company in the mold of Amazon. Investment firm UBS released a note praising the resilience of JD’s business model in both the short- and long-term following the outfit’s solid earnings beat on Monday.

JD’s earnings report was enough for analyst Jerry Liu to reiterate his buy rating while hiking JD stock’s price target from a slightly above-the-market $43 a share to $52. And it’s hard to blame the decision from a technical perspective.

Currently, JD stock has managed to hit a fresh relative high on the heels of the earnings release. Moreover, that strength looks well-supported to continue its trajectory as JD shares trend higher out of a large, failed head-and-shoulders pattern.

Using a conservative neckline to head measurement extended from the broken right shoulder could reasonably find shares rallying to $60. Stick with a blended stop-loss below $37.46, which respects larger risks off and on the price chart and JD stock might be considered for purchase, even in front of a follow-through day.

Tencent (TCEHY)

Tencent (TCEHY)
Source: Charts by TradingView

Tencent (OTCMKTS:TCEHY) is our final stock to buy. And if the price chart has any say in matters, this near $500 billion stock to buy is only going to grow larger.

Initially seen as social media business similar to Facebook (NASDAQ:FB), the diversified tech giant has been aggressive taking stakes in recent years in everything from Snap (NYSE:SNAP), to Tesla (NASDAQ:TSLA) and Hollywood films. As such, Tencent is looking more competitive against the likes of Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) and Netflix (NASDAQ:NFLX).

Technically, shares of TCEHY stock have established a two-year long corrective base since hitting an all-time-high in January 2018. The structure is similar to that of BABA stock. In this instance though, shares have been attempting a breakout the last couple months through the pattern’s mid-pivot and 62% retracement level within the right side of the base.

My recommendation is to purchase shares on its next rally above $51.50. I’d also wait for a FTD as added confirmation. This entry marginally clears both pivot and Fibonacci resistance. Moreover, this should put investors into TCEHY stock in front of some fun-filled and profitable March Madness of another kind.

Disclosure: Investment accounts under Christopher Tyler’s management do not currently own positions in any 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.


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