Stock Analysis Update – CXSE $CXSE

Since the last posting here, CXSE had completed its inverted head and shoulder pattern at 67.99 and is now ranging.

On 2nd July , before trading opened in New York, the Cyberspace Administration of China (CAC) announced it had launched an investigation into Didi on suspicion the company had violated data privacy and national security laws. It ordered the company to stop registering new users. On Sunday, the CAC instructed all Chinese app stores to remove Didi’s app. On Monday, the agency said it had broadened its investigation to include two more U.S.-listed Chinese companies. This caused Didi’s shares to drop 5% on 2nd July, then a further 25% when trading reopened on 6th July.

The sudden investigation by the CAC on Didi had a ripple effect on majority of china shares, causing CXSE to plunge 11% to the strong support level of 60! However, Didi is not a holding stock in CXSE ETF.

I had taken profit off CXSE at near 66 as i saw an evening star followed by a bearish engulfing candle, a clear sign of bearish reversal.

Now, as the ETF has rebounded at the strong support of 60, and climbing back up. I have bought the ETF at 62.87 after seeing a confirmation of its bullish reversal after the bullish engulfing candle at 63.06.

Now as the ETF is slowly rebounding back, I’m seeing that

The bear case is that the ETF may rebound off the strong resistance level of 64.78.

The bull case is that it can continue to climb up and do a dead cat bounce before continuing its upward trajectory.

I understand some of you may be worried by CAC’s sudden investigation and whether this will happen again. You must however understand that whatever CAC is doing now is only interim. At some point , the stock market is a weighing machine and will priced the China/Hongkong companies at their true intrinsic value! Currently most of the China/Hong Kong stocks are really undervalued right now!

For me, i will repeat what i have done which is

  1. Take profit by selling the ETF should the incident reoccur
  2. Buying back the ETF once bullish reversal is confirmed.

However executing the above is not easy

Alternatively, just hold the shares and buy at its strong support level which is near 60.

Time in market is better than out of the market

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