5 Chinese Stocks to Short After the Latest Crackdown
These China Stocks Are in Big Trouble
China stocks have officially seen their worst two-day fall since 2008.
I don’t know why China is shooting itself in the foot, but that’s exactly what its latest crackdowns have done.
Early this week, Beijing announced the end of for-profit tutoring in the country, stating “[C]urriculum subject-tutoring institutions are not allowed to go public for financing; listed companies should not invest in the institutions, and foreign capital is barred from such institutions.”
Essentially, they told investors to get the hell out of Dodge – and that’s exactly what people are doing. But education-related stocks aren’t the only ones in trouble.
Around $770 billion has been wiped off the value of US-listed Chinese stocks in the past five months. The Nasdaq Golden Dragon China Index (INDEXNASDAQ:HXC), an index following the biggest Chinese stocks in the US, is down over 40% over the same period:
HXC since January 2021, courtesy of stockcharts.com
Chinese stocks are getting the teeth knocked out of them, and almost every industry is getting torched.
This spells danger for long-term investors. But for short-term traders, it’s the volatility we love to see – because it’s fast movement like this that can hand us quick trades (plus one with the chance to profit by August 6!)
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- Alibaba Group Holding Ltd (NYSE:BABA)
This is the biggie. BABA, known as the “Amazon of China,” has been a tech king for years. But what was once a $320 stock hasn’t seen the $300 level since last October. As I type, it’s trading around $183 – and falling from there. This stock is down almost 30% over the past six months.
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- Baidu Inc. (Nasdaq:BIDU)
Another tech company taking a major hit is BIDU, one of the largest artificial intelligence and Internet companies in the world. But after hitting a high in February, this stock has been on a one-way train south, down about 54% from that February high.
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- JD.Com Inc. (Nasdaq:JD)
JD is yet another ecommerce company that’s feeling the heat of China’s latest crackdowns. This thing has been on a downward trend since mid-February, when it hit its 52-week high of $108. Since May, however, JD has been trading from the low $60s to the high $70s, unable to get even close to that triple-digit level.
And after this move from China, I don’t see it getting there anytime soon.
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- DiDi Global Inc. (NYSE:DIDI)
Let’s move out of big tech – remember, almost all Chinese stocks are hurting. Even the good ones. And the “Uber of China” is no exception.
DIDI just IPO’d in the US at the beginning of the month. And it’s already down almost 50% in a tragic post-IPO performance that’s only going to get worse.
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- Nio Inc. (NYSE:NIO)
This morning, I told Money Morning Liveviewers that EV was the only industry that hadn’t been burned yet. But it’s just a few hours later, and that prophecy has come true. NIO, one of China’s biggest EV players, is down over 9% today, dipping below $40 for the first time since the end of May.
And I’ve got a great short play for you.
With earnings set to come out on the 10th, I’m looking at buying the August 6 $40 puts for around $1. This is a relatively cheap bet on a flush-out in the entire Chinese market – not just tech stocks – that’s under pressure right now.
Now, this is a bonus trade idea – it won’t be officially tracked in the Profit Takeover portfolio.
The trade that I drop during tomorrow’s livestream, however, will be. Get the trade details right here tomorrow…
100%-Plus Potential Winner Dropping Wednesday at 11:30 a.m.
The last time I released an earnings trade, it made 132.5% in three trading days. (I’m looking at you, Apple.) Those who are signed up for Profit Takeover text alerts know that first-hand.
And now, I’m doing it again. Tomorrow at 11:30 a.m. ET, I’m going live to break down this monster earnings week.
With Apple, Amazon, Microsoft, Tesla, and Facebook all reporting this week, there are some major market moves to come. And I’m handing out a trade recommendation with the potential to double or more after these big-tech reports.
It’s all happening right here at 11:30 a.m. ET. But first, be sure to sign up for Profit Takeover text alerts to get the most important trades and updates.
Mark’s Watchlist
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- Tesla Inc. (Nasdaq:TSLA)
Last night, TSLA reported knock-your-socks-off earnings. The company made more than $1 billion in the second quarter – and that’s 10X higher than last year.
But where’s the stock? Well, as I type, it’s 2% in the red.
This is exactly what I was talking about yesterday. These big tech companies have already risen as much as they can – and not even billion-dollar earnings can keep them above water.
I’m releasing a bearish earnings trade tomorrow at 11:30 AM ET right here. Be there or be square…
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- Snap Inc. (NYSE:SNAP)
Yesterday, I told you about a giant put sell in SNAP. And today, on Money Morning Live, I shared the top two ways to piggyback that trade.
To recap, this trader sold 42,750 August 20 $58 put contracts. Why? Well, they wanted to collect the premium, sure. But this also means they’re willing to buy SNAP shares for $58, should the stock take a dive.
If you want to own SNAP as well, you could sell the January $65 or $60 puts to collect some real premium. But if you want to simply trade options, then I’d look at the August $80 calls for $2.60 as an inexpensive way to play a potential pop.
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- Apple Inc. (Nasdaq:AAPL)
AAPL reports earnings after the closing bell today, and I’m keeping a close eye on how the stock reacts. To me, it doesn’t matter what the report says – this name is dropping no matter what, just like TSLA.
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- Microsoft Corp. (Nasdaq:MSFT)
MSFT will report this afternoon along with AAPL – and I’ve got the same forecast for this big-tech name.
Want to see my live and unfiltered take on these reports – plus, how to trade them? Be sure to tune into tomorrow’s live event at 11:30 a.m. right here to learn how you can short these names for asymmetric profits.
But first, sign up for Profit Takeover text alerts to be sure you get all the details of my free trade recommendation.
VIX Traffic Light
Every day, we look at the VIX here. It’s my top money-making indicator, after all. And today’s light is red – but just barely. With big-tech earnings and Chinese crackdowns, it could flip yellow by the end of the day.
But today, I want to take a moment to introduce you to the Nasdaq 100 Volatility Index VOLQ (INDEXNASDAQ:VOLQ).
This is essentially the VIX of the Nasdaq-100. And right now, the VOLQ is relatively cheap, down almost 34% year-to-date (YTD).
Now, that’s important – because this is arguably one of the biggest weeks for the Nasdaq-100 index, with so many mega-caps reporting earnings.
This is a huge opportunity to profit on the downside. That’s why I’m looking at the Invesco QQQ Trust (Nasdaq:QQQ) August 6 $367.50 puts for less than $4.00. My short-term outlook here is extremely bearish – making put buys a great way to profit.
Speaking of put buys – I’m dropping a bearish trade tomorrow at 11:30 a.m. during my live earnings breakdown. Tune in right here then, and I’ll see you there!
Mark Sebastian
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July 27 2021
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