Good evening Chupacabras!
Before I buy or sell a stock, I always ask myself a series of questions. If the market consists of buyers and sellers, I try to figure out what the longs and shorts are thinking. It’s the same approach that I used to make 284% in 2017 and 330% in 2016. Click here to see how I’m able to consistently generate returns like this here.
For example, I’ll create a list of why I’d like to be long or short a stock and then see who has the strongest case.
I don’t like to jump into trades blindly. I look at specific factors before I pull the trigger – these could be fundamentals, technicals and catalyst events.
Now, if you’d like to know more about my approach, here is an example of an actual trade that I alerted my subscribers about earlier today.
Before I even considered buying JD.com (JD), I scoured through all the news, catalyst events and looked at chart patterns.
The stock caught my attention because of singles’ day – a massive e-commerce event held in China. The company announced sales of in $23B in 24 hours. To put it into perspective, Amazon.com generated $14B during Black Friday weekend.
But here is the thing…
Last Friday, Chinese internet stocks got hammered by the National Security Agency (NSA). The NSA noted China is violating a 2015 cybersecurity agreement and the U.S. could potentially smack them with sanctions. Additionally, trade tensions are still brewing between the two countries.
However, when you weigh out the pros and cons it feels like all the bad news is priced in. You see, JD already plummeted 50% this year and I think it’s due for a bounce.
Fact: JD.Com increased its singles’ day sales in 2018 by almost $4B – over a 25% increase – from last year. Now, I don’t about you but that doesn’t seem like a sign of weakness.
You know what also doesn’t sound like weakness?
- Walmart (WMT) has a 12% stake in JD, after purchasing 144M shares in 2016 and increasing its stake in 2017.
- Chinese social media giant Tencent – through its wholly-owned subsidiary Huang River Investment Limited – owns an 18% stake in JD. This partnership provides JD with access to the massive social network base WeChat, which reached 1B monthly active users (MAUs) in Q2 2018.
- Alphabet Inc (GOOGL) invested more than half a billion in JD in a partnership aimed at bringing e-commerce to the entire world.
All of these catalysts should generate a positive momentum in the next days until the earnings call of next Monday.
That said, all eyes are JD’s earnings, which is set to be released on November 19. Keep in mind, it’s not my goal to hold the stock into earnings because these events are extremely volatile.
I like JD long here, but what I like more is the fact I created a plan and had catalysts and the chart supporting my idea.
Full Disclosure: I’m long JD through stock.
The diary of a real $ trader,