01/18/2022
Everyone’s bearish on Chinese stocks, which tells me I might need to start buying…
(I’ll probably catch hell for this, but I’m rolling with it.)
I’ve always had a real love for the way they trade, the small caps that is… But they haven’t been all that fun lately.
What invariably happens is one of these companies IPOs at a ridiculous price and then it proceeds to Tom Petty its way down (come on guys, Free Fallin’?).
I’m talking about going from double-digit IPO prices to single digits — sometimes below a dollar.
Why on earth would I ever trade these?
Well, let me be clear… I don’t take large positions and I only scale in.
In my opinion, anything else is typically disastrous…
But the reason I’ll trade them is because they’re largely unknown and have a limited number of shares float, meaning they’re subject to magnificent spikes in the share price.
This is part of the main strategy I use for members of RapidFire and is exactly why we took over 300% on CLPS
And if they haven’t gone parabolic yet, even better…
Here’s one — Cloopen Group Holding Limited (RAAS):
We’re on the daily time frame, but I didn’t include the price action since IPO about a year ago.
All you really need to know is that RAAS was as high as $59.00, far from the current mid $2.00’s…
Of course, it’s still coming down, but I have a couple of ideas on how to trade it.
The first thing to note is the RSI on the lower chart.
See all that bluish-purple highlighted? That’s a bearish signal built into the particular RSI indicator I’m using and, looking at the movement in the price, you can see why…
That’s a strong downtrend.
And maybe a Falling Wedge to the $4.00 level at the Point of Control…
The same can be said for the On Balance Volume (white arrow). It has now crossed below the midline.
The only sign of any potential bullishness here is the MACD, which the white dotted arrow line shows has trended upward and is finding a sort of equilibrium…
How I trade these is simple: I keep watch on Relative Volume for unusual activity.
From there, I’ll buy a single share to keep in the account… It sounds weird, but here’s why I do it.
When you have your trading platform or mobile app in front of you, you’re building a certain psychology around your holdings and, although it sounds strange, you’re getting to know the stock…
You’ll likely check the chart whenever you see a spike in the share price and, so long as you don’t miss the move, the price action will tell you when to start moving in…
…when the stock creates a solid base after strange volume.
OR…
I’ll buy in intervals at bottom prices and at a level of risk I’m willing to assume. And I usually don’t worry about it too much.
If I do this, I’ll keep some shares around to swing for profits beyond my core position while I wait for the real move.
Why? To lower my overall cost basis.
Watch for the base on RAAS and volume… always volume.
(Disclosure: I have no position in RAAS.)
Keep moving,
This material is not an offering, recommendation, or a solicitation of an offer to buy or sell the securities mentioned or discussed, and is to be used for informational purposes only. Any performance results discussed herein represent past performance, not a guarantee of future performance, and are not indicative of any specific investment. Due to the timing of information presented, investment performance may be adjusted after the publication of this report. There can be no assurance that the future performance of any specific investment, investment strategy, or product made reference to directly or indirectly in this communication will be profitable, equal any corresponding indicated historical performance levels or be suitable for your portfolio.
