Pre-Market Plan [10/24-10/25]: Markets will become more difficult in coming 2 weeks
Good Morning from Hong Kong -
Hope everyone is doing well! I’m going to be in between Hong Kong and China for much of the next 30-40 days so I will only be able to send out emails very sparingly. All my direct ideas will be shared with Members on Whatsapp.
I’ve been sending out all my strategy updates exclusively on Whatsapp to Members with conclusion-driven notes. I think it’s been very effective/efficient so far.
If I have any actionable ideas, I share them in a very straightforward manner. Extremely easy to understand. Very easy.
A quick recap on what was discussed this week so far, and then I’ll have a few lines on the near-term outlook.
Weekend Pre-Monday 10/21: A New Idea was shared with Members that our DCF model believes that - at some point -LRCX goes to 77 (then 73) and TSLA goes to 235 (then 220). I loaded up a bit on LRCX 73 and TSLA 220 as I always participate in the ideas discussed.
Pre-Tuesday 10/22: Gave 20350 NQ Nasdaq-100 (then 20500) as a Key Level that I believed would Fold and see downside continuation if seen again.
Pre-Wednesday 10/23: Shared opinion that 2 days in a row of recovering from a gap down had led Bulls to use up too much energy and that the next gap down will be…a big one.
Pre-Thursday 10/24: During regular trading hours in the U.S, the indices indeed had a very difficult session as discussed from 10/22-10/23. Once NQ retested 20350 from my 10/22 note, it saw downside continuation all the way down to 20050. Fortunately, After hours, Lam (LRCX) and Tesla (TSLA) reported and stars aligned with my DCF Model of 77/share LRCX and 235/share TSLA as these upside targets are achieved earlier than expected from 10/21 note. I expected these targets to take a few weeks to work out. It worked in 72 hours. When a sequence works sooner than my initial timeline, I reduce the core positioning and leave a partial position.
Near-Term Outlook: Clearly, bigger forces behind the scenes are attempting to shakeout investors ahead of the U.S. election. Fundamentally, nothing has really changed to cause yesterday’s earthquake-like selloff. Positioning wise though, I think the next two weeks are going to be characterized by larger than usual moves.
What will I be doing? Studying companies in the background to find attractive risk/reward profiles like LRCX/TSLA and share them with Members directly on Whatsapp when I see companies trading at “discounts” (relatively speaking) open up.
If the markets are about to get as volatile as I expect it to, I think many opportunities should resurface. Until specific setups are ready though, I urge patience. Once ready, I will share with the Members on Whatsapp Monday-Thurs.
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If you are a public reader and would like to give us a little support to help us continue to provide high-quality analysis for all, please visit IBKR (good execution, good research, advanced capabilities).
Interactive Brokers now also has a Forecast Events feature that allows users to place bets on event-driven outcomes (like the Presidential Election).
Disclaimer on H-Shares:
A note of caution for H-Shares (or China ADRs). They are extremely, extremely volatile during macro policy changes, and as a sector, exhibit the highest forms of volatility compared to other sectors I’ve studied. Holding H-Shares or China ADRs is only one notch below holding Crypto/AltCoins in terms of volatility. Only folks with the highest risk tolerance and highest ability to manage volatility should look at H-Shares. H-Shares can swing 20-30% in the span of days on the upside or downside. It can make Nasdaq-100 stocks (my core coverage) look slow.
As an example, Meituan which was a left for dead stock was trading at $60HKD just a few months ago. Shares have nearly tripled to around $180HKD, with the bulk of the advance coming from the past few weeks.
My DCF Model approach, which members know have powerful degree of forecasting power in my core coverage because of my familiarity with the companies, is NOT going to work as well on H-Shares. Any commentary that I give on H-Shares relies much more on macro observation and technical analysis, which may or may not be a full picture of a company’s fair value. For this reason, there is a speculative type of element when it comes to H-Shares. Investing in H-Shares is completely different from investing in U.S. stocks.