Goodbye Chinese stocks on US exchanges
On the 10th and 11th of October, the Trump administration is scheduling talks between Washing and Beijing about the trade war between the US and China.
Not only will they discuss and negotiate the trade terms, but also talk about the possible delisting of Chinese companies from US stock exchanges as well as limit the US investors exposure to Chinese markets through government pension funds…
On Friday we saw a number of Chinese stocks shed 5% to over 10% with investors pulling out of Chinese stocks listed on US stock exchanges including Alibaba and JD.com.
So, what would happen if these delisting’s took place?
First this could lead to a stronger dollar!
According to Senior US economist, Gary Hufbauer explained on a macro-economic level,
“By prohibiting investment in Chinese companies, Trump could inadvertently strengthen the dollar and cause interest rates to fall further. If forced out from China, investors might park their funds in US Treasuries.”
He also added,
“If he were to do that, there would be questions as to whether he’s setting a precedent for other countries he doesn’t like” Hufbauer was slightly concerned that President Trump could do the same with Europe and Airbus.
We then had CNBC’s Jim Cramer, who supports the notion of blocking US investments in China, who tweeted:
Whether the action is good or bad for the economy, the charts couldn’t care less.
In fact, one thing I know is that the Dow Jones chart is showing major upside to come.
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This Upside-Down Triangle could strike a + 15.98% whammy for the Dow Jones
Looking at the weekly chart of the Dow Jones, you can see since 22 January 2018 the price has moved in a triangular shape, what I call an ‘Upside-down Triangle’ pattern.
This pattern has three characteristics (which you can see above):
1. A high price (Top of the triangle)
2. A Low price (Bottom of the triangle)
3. A preceding uptrend
Once the price breaks above the high price we can expect the buying pressure and demand to continue which will once again push the market higher…
In this case, we saw a breakout above the high last month. This tells me, despite what is going on in China and the US, this chart is set to fly to new highs.
To calculate its next target, we’ll take the difference between the high and low price and add it to the high price.
Target = (High - Low) + High
= (26,675 - 22,410) + 26,675
This means we can expect the Dow Jones to head up next to 30,940.
This is a 15.98% rise which we can take advantage of.
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