The best performing sectors after a deep market correction (like the one we had in the last quarter of 2018) are usually the ones that get hit the worst. Chinese names certainly fit that category. Most had a 50 to 90% drawdown in 2018; therefore, it should not be a big surprise that many Chinese stocks are among the best performing year-to-date.
CQQQ, which an ETF concentrated in Chinese tech stocks, is firmly back above its 50 and 200-day moving averages and with rising relative strength rating. It is setting up in a tight range near its year-to-date highs. If you look under its surface, you will notice quite a few individual Chinese stocks setting up for a potential leg higher. I highlighted a few of them for our members at Market Wisdom.
The current bull market continues to correct through sector rotation. While money is flowing into financials, semiconductors, energy, and software, healthcare and biotech have been under pressure as of late.
Will Disney+ disrupt Netflix or the new online streaming service is not a big positive for Disney and neutral for Netflix. We will know a lot more about how the market perceives it after Netflix’s earnings on Tuesday.
We also cover athleisure stocks – NKE and LULU are consolidating near all-time highs.
The Unicorns (Uber, Pinterest, Airbnb) are going public and people are talking about IPOs again. My rule of thumb is that if a new IPO is very popular, it will be too hard to extract money in the first few months. LYFT is the most recent example. FB was also a dud in its first few months as a public company. It didn’t start trending before it crushed earnings estimates and gapped near all-time highs. The situation in BABA was similar.
When it comes to recent IPOs is better to stick to companies most people haven’t heard off that are showing constructive price action. Timing is also very important. The two best market environments for trading recent IPOs are:
Right after a major market correction. Due to their small float, recent IPOs tend to be very volatile. They can easily go down 50% – 90% if the S&P 500 loses 10-15%. They can just as easily double and triple in the initial stages of a market recovery.
When the general market is in an uptrend and risk appetite is growing.
Here are five less-talked-about recent IPOs that are currently showing constructive price action: INSP, TENB, DOMO, EVOP, PS.
Bull markets often correct through sector rotation. When many leading enterprise software stocks were hit last week, the market averages didn’t skip a beat. The money just rotated into other sectors – semiconductors, energy, financials, retailers, biotech.
The dips are still welcomed as buying opportunities by many. The S&P 500 and the Nasdaq 100 are less than 2% below new all-time highs. The U.S.-China trade deals seems to be priced in. In other words, expectations going into the next earnings season, which starts next week, are high so companies better not disappoint.
In late February, after Roche paid a hefty premium to buy Spark Therapeutics (ONCE) for $4.3 Billion. The acquisition ignited a rally in the entire gene therapy industry. Uniqure (QURE) gained 50% in a day going from $40 to $60. It is still considered an acquisition candite. Its current market cap is $2.3 Billion.
After the gap, QURE consolidated through time for a few days. Then, it broke out again and it quickly ran to $70, only to retrace back to $60, where buyers are stepping up again today. While most momentum stocks are under pressure today, QURE is up more than 4% and it is perking up from a tight range contraction zone. This is a notable relative strength and a sign of institutional accumulation, which bodes well for higher prices ahead.