I recently shared a post titled "AOT Top Picks Return +121.36% YTD 2022" you can click the link or click the thumbnail to review that post if you haven't already!
I wanted to share our latest Top Pick of the Week and the reasoning behind it and maybe you can make a trade out of it yourself, too!
Recently I've been seeing signs of topping formations in many china based stocks. The topping patterns are not only showing themselves in individual names such as $BABA, $BIDU and $PDD but also clearly presenting itself in $YINN which is a bullish 3x china sector ETF.
Adding to the reasons why I turned bearish on China after a large multi-week rally is because of China's super strict government which decided to reopen their economy after mounting pressure and civil unrest. They decided to roll back the very rigid COVID policies and laws. Plus the US has been given access to be able to audit Chinese ADRs trading within the United states. Therefore the fear of being delisted off US exchanges has diminished greatly... and even despite all of the "great news" Chinese stocks gapped up initially but weren't able to maintain their rally and ended up closing red Thursday. That added to my bearish bias and confirmed my views.
*** UPDATE ***
We went on to close our $YANG position for a +8.27% or +$2068 gain on 12-20-2022!!
So now lets review some charts!
And below $BABA, $PDD and $BIDU showing textbook topping patterns!
So, as a short term trader how could you potentially capitalize on this technical development?
When I spot topping and bottoming formations in the market I like to look for leveraged ETFs to capitalize on the potential move. Oftentimes with these formations you're presented with attractive and well defined levels of risk. When these trades do work out they can generate powerful short term moves! As short term traders this is exactly what we're looking for!
What ETF would be appropriate for this particular setup?
$YANG - $YANG ETF is a 3x leveraged bearish China ETF! This is the ETF I will be using for this trade setup!
What does the trade setup look like and how do I trade it?
$YANG has been forming a nice bottoming pattern over near 2 trading weeks and since this ETF has an inverse effect when stocks like $BABA, $PDD and $BIDU trade down this ETF naturally trades UP! Here is the official Art of Trading Alert given to Art of trading members on 12-15-2022:
Examine the setup: Do you see the bottoming formation? Support is being created in the lower $11 price range and a technical reversal higher would occur near $13.
The Stop Loss: The stop loss on this trade is set slightly below the previous 2 day candle lows. With a smaller position size a short term trader could set a stop below the $11 price range.
The Target: My short term target is near the $15 - $17 range. Although I wouldn't hesitate to reduce the position by half if a gap up scenario occurred. Leveraged ETFs aren't meant to be held for long periods of time. Booking gains never hurts in this current market environment!
*** UPDATED SELL ALERT 12-20-2022 ***
For previous examples of how we traded $YANG in 2022 take a look at this post here:
I hope you found this post helpful!
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