Hey There Income Hunters,
Before we head to the Far East, it’s worth noting that markets took a breather on Tuesday after an awesome day Monday for the inflation trade.
But, man, what a Monday it was.
Surging spending. Rising prices. Looming inflation …
Feel the energy!
There’s nothing quite like a major breakout about a 200-day moving average on high volume, and many precious metal miners ran up in that fashion.
One great example is the “King of Gold” Barrick Gold Corp. (Ticker: GOLD).
Toronto-headquartered GOLD was the miner that Warren Buffet purchased about a year ago… it’s up about 20% from that time but I am sure the Oracle of Omaha is doing just fine…
More for us peasants!
This GOLD breakout in the chart below is textbook. The stock blows away the 200-day moving average on huge volume …
Next Stop: China
Here at Power Income, part of my job is to keep you prepared for what’s next — and I’m turning an eye toward China.
The Chinese stocks I have been following are on the rise and in perfect position for a mini-breakout of their own.
I’ll briefly give you my analysis of my No. 1 China stock JD.com Inc. (Ticker: JD), which will provide broader context for the current climate in the world’s most populous country.
Regular readers know that I have been tracking JD for a while waiting for China’s growth to get back on track, which it has over the past couple of weeks.
China’s recent five-day holiday traffic as the country celebrated May Day was massive … with more than 200 million trips recorded nationwide — which surpassed pre-Covid levels.
Retails sales were up big in March, rising almost 30% so the turnaround seemed to be in place and the iShares Trust China Large Cap ETF (Ticker: FXI) confirmed that with a nice rally…
JD recently spun off JD Health and raised $3.9 billion, becoming China’s largest online healthcare platform in the process. The company is now hot on the heels of another spinoff of — JD Logistics, which will raise another $4 billion…
JD was already the largest online retailer in China and is also active in the fintech area through its 42% stake in JD Digits.
That is all very stout, but here’s something that should draw your immediate attention …
My discounted cash flow model values JD at $99.60 meaning the stock is trading at a 30% discount …
Now look at the chart below. It appears JD stock went through a capitulation phase last week… Capitulation or surrendering occurs in a down market with a big down down day on high volume with no follow through to the down side…
The stock bounced back pretty well, though, and I think it is now ready for a good run higher …
I put on a 68.5/73.5 call spread to June 4, 2021.
Earnings are released tomorrow morning pre-market …
It will be exciting to see results after this rally…
Bring It Home
We #Income Hunters have to be nimble as value shifts sectors AND geographical locations.
Getting in on China just as its turning will reap nice rewards.
Another example … I own a 11/114 call spread to June 11 on Taiwan Semiconductor Manufacturing (Ticker: TSM), which is turning the corner, as well …
I will want to add — and I’ll keep you updated as I do.
Have a great day and as always…
Live and Trade With Passion My Friends,
Griff
