Has The Rally Just Begun... In China?

Today I'd like everyone to welcome back Ben Brinneman from CSquaredTrading.com. Today Ben is going to dive into China and also touch a bit on a strategy he uses that has been very successful for him. Please read and enjoy the article, and feel free to give him your comments and questions!

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It’s obvious the U.S. stock markets have been rallying in a big way since March, and tons of people think they have missed the 50% - 60% rally. They get frustrated, and it’s the talk of the town, but we have seen a new sort of rally occurring. While the former is true of the U.S. rally, if you take a closer look at an emerging market and their equities, you will find that China is king! I hate to say that, but their recent performance numbers prove it. I watch a handful of companies in CHINA ever since they listed on the Nasdaq, as well as several other exchanges here in the U.S., such as ADRs (American Depository Receipts). Every single one of these companies has been doing fantastic, but it seems that people are timid when it comes to investing with them, perhaps due to the government being communist. One of the hottest topics on CNBC lately has been China, so many investors are going to be turning a watchful eye to some Chinese businesses and other places overseas as well. Once American investors start feeling a little less gun-shy, we could start seeing some significant upward moves.

These companies that I have researched, traded, and invested in have been outperforming the market on a day-to-day basis. Even when the U.S. markets are down, my account will remain flat or even go up because of the resilience of these companies. Many of these equities have a “low float” (a low number of shares outstanding), precluding that whenever a flood of buying occurs, the stock soars or vice versa the stock tanks on selling, a lot faster than an equity with a large number of shares outstanding, such as existing U.S. companies that are listed. Many of these Chinese companies are relatively undiscovered, and once investors realize what potential future growth they have, they will be drooling at their low PEs and beautiful fundamentals and piling in. I would be cautiously optimistic with 35% of my portfolio invested in China.

Trends are shifting in the world. The American consumer is not what he/she used to be. The American consumer is actually dead. Car sales last quarter in China alone were up 70% and in Brazil they were up around 50%. Meanwhile the U.S. struggled to get car sales in the positive. This means that oil will be consumed as cars are purchased, and they will seek alternative fuel methods. One of those methods is coal. Coal will rise, and oil will rise. I am finding unbelievable companies to trade and invest in that are involved in these different sectors. As global trends shift, I don't presently, kick myself for selling Bank of America way too early after purchasing it at $2.93 back in March. I find stocks lately that are running almost 100% in days to weeks and months because of these shifting demands.

I have an entire watch list, 13 rules, and training video that I give out for free, but the most important part is my strategy that I have developed over the last four years in order to trade in and out of these companies accurately. Without this, you fellow trader, are merely shooting in the dark like a midnight cowboy as you trade, and even if you are investing, this will help you create a margin of safety on your purchases. A million-dollar-banker buddy of mine used to purchase stocks he liked at whatever price it was at. Now he calls me to verify a good entry point on a company that he loves! The strategy is named the Triple-Whammy Trading Technique. Below is a description of a piece of the puzzle and how it works.

(Important Note: The Triple-Whammy Trading Technique only works well if the direction of the Bollinger Bands is primarily from left-to-right, rather than primarily up or down)

Set up your chart:  Make your chart-settings as follows:

(1) Time Period: For day trading, 30 minutes or one hour; for swing trading, 3 days or longer
(2) Chart Style: Candlestick
(3) Chart Frequency: For day trading, one minute; for swing trading, 10, 15, or 30 minutes
(4) Upper Indicators: EMA (9 period) and Bollinger Bands (20 period)
(5) Lower Indicators: MACD (12, 26) and RSI (14)

Now you’re ready to proceed.. There are three essential components of this set-up:

For quick profits with a Triple-Whammy Perfect buy (Buy-Low-then-Sell-High; or Buy-to-Cover Short-Sell), these three legs are as follows:

(1) The candlesticks will violate the lower Bollinger Band.
(2) RSI must fall into oversold territory, under 30, and preferably in deeply oversold territory, under 20.
(3) The MACD (blue) line must be under the signal (red) line, and falling; and then must turn back upwards and cross the signal line. The crossover is the final confirmation — but if the turn upward is sharp enough, you know it’s getting ready to do a crossover, so it’s best to go ahead and act, if the prior two conditions are already in place.

For quick profits with a Triple-Whammy Perfect sell (ShortSell-High-then-Buy-Low; or Sell-to-Close Long Position), these same three legs are as follows:

(1) The candlesticks will violate the upper Bollinger Band.
(2) RSI must rise into overbought territory, over 70, and preferably in steeply overbought territory, over 80.
(3) The MACD (blue) line must be above the signal (red) line, and rising; and then must turn back downwards and cross the signal line. The crossover is the final confirmation.

This strategy is available as well as an additional advanced strategy that we just put together called the VWAP Quad Boom Setup.  Both of these strategies will greatly enhance your trading right away by informing you of the trading ranges that you are in and how to enter and exit your trades.

As time goes on you will notice the shift into other emerging markets and you will wonder how come I did not participate?  You will eventually be able to correctly identify these companies with a little bit of research and some technical analysis, and not only that, but make a brilliant entry into the equity.  Buffet even mentions entry as a part to his investment thesis, there are three things to making a wise investment.  Over a little bit of time, with the right trades and investments, our patience will pay off with great rewards!

Ben Brinneman
Check us out at csquaredtrading.com.