WHAT TO DO NOW: The iShares EM Fund (EEM) has popped back above its 50-day line, which is a plus, but the Emerging Markets Timer remains basically neutral, having made no net progress over the past two months. Thus, we continue to take things on a stock-by-stock basis. We have one change tonight: We’re moving our remaining half position in China Lodging (HTHT) back to Buy a Half.
The situation for investors as the year draws to a close is looking less uncertain. The tax bill that everyone has been focused on is now safely out of Congress and only awaits the President’s signature. While many of us are on vacation, mutual and hedge fund wizards will be combing the final bill for clues to future success for unexpected companies. The Brexit situation also looks to be clarifying, with a few major decisions agreed to. That leaves North Korea and a year-long run-up to the 2018 mid-term elections, of course, but that’s a long way away for growth investors. (And don’t forget that January will bring another flood of quarterly and annual reports.)
The Cabot Emerging Markets Timer is basically neutral at this point, though its recovery in recent days has been encouraging. The iShares emerging markets ETF (EEM) bounced back from its December 7 low to sit just above both its 25-and 50-day moving averages, which are almost on top of one another as EEM has been moving sideways since the middle of October. PowerShares Golden Dragon ETF (PGJ), got a big boost from a high-volume rally on December 18, and has been holding onto a good chunk of those gains, but is also within the trading range that has corralled it since October.
The bottom line is that, with the longer-term trend still up, you should lean bullish. But the intermediate-term trend is mostly sideways, so be choosy on the buy side and honor your stops and loss limits for your losers and laggards.
The markets had a good day, with the major indexes all finishing on the upside despite slippage in the afternoon session. At the close, the Dow was up 56 points (0.22%), the S&P 500 gained 5 points (0.20%) and the Nasdaq eking out a gain of 4 points (0.06%). The iShares MSCI Emerging Markets ETF (EEM) was up a healthy 0.30 points (0.65%) at 46.11.
58.com (WUBA) is likely in the early stages of a consolidation/base-building phase following the stock’s dip from 79 to 67 that ended on December 1. That new base, with support around 70, looks sound. I think Buy a Half is the right rating for now. BUY A HALF.
Alibaba (BABA) ran from about 90 as the year began to 192 in late November, so it’s hardly a surprise that it’s been taking a break, and is trading around its August levels. It’s no great comfort, either, and I’m anxious for the stock to get going again. This is one of the biggest stories in China, so I will be as patient as I need to be. I’m holding out the possibility of taking partial profits if 1) the stock spends more time below 170 and 2) it stays in the doldrums while the rest of the emerging markets universe gets moving again. For now, however, we will keep our Hold rating. If you don’t own any BABA, I wouldn’t be opposed to starting a small position on one of the stock’s dips to 170. HOLD.
Baidu (BIDU) is in a situation similar to BABA, consolidating after a gap down on October 27 with support around 230. BIDU can’t be counted as one of the glamour stocks at this point, but it’s a big name, has plenty of cash on hand and has a dozen irons in the fire for new joint ventures and solo projects. It may be that it will take a positive quarterly earnings report for BIDU to get moving again. But when it does, it will have a long base to work with. A slip toward our buy price at 220 would be bearish, but as long as this pause stays reasonable, I’ll keep holding. HOLD.
It looks like our November 30 sale of half of our position in China Lodging Group (HTHT) was just what the stock needed. Since the beginning of December, HTHT has soared from 106 to 135 and is within striking distance of its all-time highs around 140. In short, it looks like the short, sharp shakeout is over for the stock and it’s time to put our half position back on Buy. BUY A HALF.
GDS Holdings (GDS) began the month with a quick correction from 20.5 to 18. Taking into account that the stock is still young, I kept its Buy rating, and that has worked out well. GDS started a vigorous rally on December 7 and has pushed to new highs above 22 with increased trading volume. BUY.
Grupo Supervielle (SUPV) has been through a series of shakeout moves, from its major dip during the first half of November to smaller pullbacks in late November and late last week through Monday. But SUPV is now trading free of overhead and is trading well over its 25-day moving average (now about 27). With the late-October-through-early-December base under its belt, the stock is technically sound. BUY.
Our half position in Jupai Holdings (JP) was sold in a Special Hotline on November 29 when the stock was in free-fall. JP eventually bottomed on December 6, a little over 40% below its October high. (Our loss was much less than that, of course.) But we’re still interested in this unusual Chinese story, and are interested to see that it has tightened into a very narrow trading range on progressively calmer volume. We’re not interested in buying it back, but it might be interesting for you to keep an eye on the chart just to see which way the stock breaks from its consolidation. KEEP AN EYE ON.
TAL Education (TAL) is now eight weeks out from its October 26 stumble following a disappointing earnings report and I have two observations about the stock. First, there is very little danger of further declines. Counting its gap down, TAL has made three bottoms with the last two progressively higher than the first. That constitutes a durable bottom and a rising base. Second, investors are taking their time about bidding the stock back into the mid-30s. This is probably because the stock is extensively held by institutional investors, with relatively few left on the sidelines to get back in. These investors are in it for the long run, and it will take a new catalyst (Q4 earnings?) to stimulate another round of buying. We will keep an eye on the stock’s advance on its 50-day moving average (now just under 30) and its December high at 30.5 as resistance points to be overcome. HOLD A HALF.
Tencent Holdings (TCEHY) tagged 56 on November 21, then corrected sharply on rising volume until it just dipped under its 50-day moving average on December 6. At that point, the stock jumped back to its 25-day moving average and resumed its prior uptrend as if the November streak higher on heavy volume and subsequent correction hadn’t even happened. You can use the stock’s volatility to start a position on a dip of a point or so. BUY.
At this point, discounting the dip to 89 in late October and the rally above 120 in November, Weibo (WB) has been trading flat since the middle of September. It’s not in danger of tripping our loss limit, but it’s not exactly burning up the track either. I think the story is intact and the long-term chart is healthy, so I’ll keep the stock on Hold for now, as there’s no stress on the portfolio to either raise cash or increase exposure. HOLD.
YY Inc. (YY) is just fine. The stock’s post-earnings rocket shot on November 16 gave way to a late-November correction that found support at its rising 25-day moving average. And the stock has been riding that 25-day average higher ever since. The stock’s upward angle of attack is very close to the trajectory it’s followed since April. We’ll stay on Buy. BUY.
ZTO Express (ZTO) is young and volatile, and we are fortunate that it didn’t trip our loss limit. After a steep decline from 18 at its November peak to near 14.5 on Monday, ZTO has staged a three-day rally that has it back above 16. It’s tempting to put it back on Buy, but the stock is right on its 50-day moving average and I’d like to see it confirm this uptrend before jumping back in. HOLD A HALF.
