China…Case Study…SUPPLY

  • Posted by
  • on January 17th, 2008

At the beginning of last year, China looked like a top. When it broke, The Chairman and I were all over it.

It proceeded to more than double off the March lows. The good news is I was not short and I killed it on Baidu . My opinion did not stand in the way of PRICE ACTION. Price action got real frothy again in October of last year.

Here is what I wrote :

China is Parabolic…Don’t be a Hog!
Parabolic rises can be fun if you are aboard, but it does not generally end well.

China has gone parabolic. Check out the FXI today, which I should be long. It was up NINE (9) percent TODAY. This is after being up 100 percent just this year. This is a country index, not just one business. LFC (China Life Insurance) was up 11 percent today.

Don’t think China is immune from a crash. With oil now at $86, the Saudi Arabian stock market has still managed to crash over 70 percent.

Tonight I got the most telling evidence of all about the parabolic move that’s underway in China…an email from my pal Eric at Blackstar:

Getting scale out trades in many China related stocks. The party is getting old, but still could go more parabolic, of course.

Even trend following systems are ‘locking in’ gains. That does not happen too often.

Don’t be a hog!

Now we have fallen 30 percent from all time highs again to start the year. I sold all my Baidu on the way up and my last piece in the 300′s and bought Sina at around $50.

I was stopped out of SINA last week, one of many stocks in crash mode that I have been stopped out of the last few months. If the Chinese market were just to fall back to it’s correction point of last January, well…you can’t handle the truth!

I have been trading the last week, but I won’t be looking at Chinese stocks for some time. They have some serious climbing to do before they start looking interesting again. My gut says, we have really popped this time. I was a year early on my first call.

Tough business this investing….

Discipline is needed on the way up and the way down. Wall Street will separate you from your money much faster than you accumulate it.

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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