Sell Baozun (BZUN) and hold the cash.
Emerging market ADRs (EEM) are staying within their recent trading range, but Chinese ADRs (PGJ) are now showing weakness. This is the reverse of the recent trends, and bears watching.
The downtrend in Chinese stocks is hitting many of our holdings, but has been especially hard on Baozun (BZUN), which we took a half position in on September 9 (our buy price was 13.7). BZUN has now fallen to 13, which isn’t even a 5% loss. The warning sign is that the stock has fallen from its October 10 high of 18.6 to just above 13. That’s about a 30% decline from the stock’s high, and that kind of negative momentum shows that the buyers have left the building.
We recommend selling Baozun and taking the small loss.
Several of our other stocks are coming under pressure, and it’s impossible to separate the normal pullbacks from genuinely soured positions. It’s especially difficult as quarterly earnings reports are coming up for most of our holdings in the next two weeks. But none are cracking support, so we’ll hold on to our other positions and see what earnings season brings.