The China Tech Bull is Back!

Tech stocks stumbled once again yesterday…

The semiconductor sector – one of the bull market’s strongest fortresses – was besieged by sellers Monday morning.

After opening higher, the Philadelphia Semiconductor Index slipped and fell 1% by the closing bell while the S&P 500 finished the day near breakeven.

While one losing day isn’t the end of the world for these high-tech standouts, some traders are concerned about the drop. After all, these tech winners are supposed to rise every single day. No one has time for consolidation. Or worse – a pullback!

But we shouldn’t complain about a soft day from the semis. Many of these stocks are sitting on double-digit gains during the first half of the year. Aside from the FAANG brigade, it’s almost impossible to find returns that even come close, right?

Think again.

While the financial media have pounded the table for semiconductors and the big tech stocks for the better part of the past six months, the biggest momentum stocks of 2017 are all coming from one place: China.

China’s tech ADRs continue to rip higher at we barrel toward the end of the second quarter. If you’ve been following along this year, you already know that we’ve booked gains on Momo Inc. (NASDAQ:MOMO). We were able to harness a fast 50% gain in just a few weeks with this quick trade. And MOMO isn’t the only Chinese name lighting up the market this year…

Alibaba (NYSE:BABA) is another solid winner from our trading portfolio. We cashed in our chips on this trade in early May for gains of 23%. The stock continues to prove all the naysayers wrong as it pushes to new all-time highs once again this month. In fact, Alibaba stock has posted gains every single month of the year so far. It’s now up an incredible 62% in 2017.

Even lesser-known Chinese tech ADRs like Weibo Corp. (NASDAQ:WB) are getting love from short-term traders.  Weibo is the most popular of China’s Twitter-like microblogging platforms (Twitter and Facebook are both banned in China). This stock is up more than 75% year-to-date.

There’s no question that these Chinese tech stocks are attracting new buyers this year. It’s the perfect place to look for your next hot momentum trade.

But before I get to today’s play, we need to check up on a Chinese ADR that’s sat idle in our trading portfolio for the past several weeks. When we first jumped onboard Baidu Inc. (NASDAQ:BIDU) back in May, I mentioned that the stock has been a bit of laggard so far this year.

“China’s Google” couldn’t seem to get over the hump. We hopped on the stock as it was breaking out to new year-to-date highs. But it hasn’t followed through just yet. As of this morning, BIDU remains stuck in a choppy range.

The stock is up about 9% so far this year. That’s not terrible. But it’s also not very exciting. While I haven’t totally lost hope for BIDU, it’s not delivering the performance I had hoped for just yet.

That’s why I want to jump back in the fast lane and take another shot at a streaking Chinese ADR today. Even though BIDU has been an underwhelming performer for us so far, we can still find some choice setups in the sector.

Check out Inc. (NASDAQ:WUBA).

WUBA is a Chinese internet stock that’s quickly coming back to life after a pullback earlier this month. The stock has posted an incredible run so far this year, posting year-to-date gains of nearly 60%.

After a quick visit to its 50-day moving average, this stock looks ready to blast to new highs. Yesterday’s move higher shows that this momentum play isn’t out of gas just yet…

Our best shot at beating the summer trading blues is to grab onto momentum plays like WUBA when the market presents the opportunity. It’s a great chance to snag double-digit gains in a matter of weeks…


Greg Guenthner
for The Daily Reckoning

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Greg Guenthner

Greg Guenthner, CMT, is the editor of Opening Bell Fortunes and Seven Figure Signals. He has been with Agora Financial/Seven Figure Publishing since 2005. In 2019, the average position in Greg’s Sunrise Fortunes portfolio outperformed the S&P 500 by 1.65x.

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