You wouldn't know it from watching the mainstream media... but Chinese stocks are taking off.
China's market went from slowly grinding higher to breaking out earlier this month. And it hit a new 52-week high in the process.
The Chinese market is now in positive territory for the year in spite of the COVID-19 crisis. Again, this isn't something you'd see in the mainstream media. But it's what's happening right now.
We don't see that as a bad sign, either. The major rally we just saw doesn't signal that China's market is peaking. Instead, investors can expect more gains ahead.
Let me explain...
Today's topic is a tricky one for most investors. It goes against what might be the most well-known adage of investing... buy low and sell high.
Instead, I'm telling you to buy high... after a major breakout, with the expectation that you'll be able to sell even higher in the future.
I might sound like a fool for saying that. But what I'm really saying is this...
The trend is your friend. And right now, in Chinese stocks, the trend is UP.
History shows that following the trend is a winning idea. I've crunched the numbers time after time – including today. And history shows that buying assets that are going up is a smart bet.
Today's situation is another example of just how powerful the trend really is. Again, China's market recently hit a new 52-week high. We can see it in the chart below...
After grinding higher from March through late June, Chinese stocks broke out heading into July. They hit a new high as a result. And while they've fallen a bit since then, this idea is still fully in force.
You see, since 2000, similar 52-week high extremes have only meant one thing... outperformance in the coming months. Take a look at the table below...
Chinese stocks haven't been a home-run performer over the past 20 years. They've returned just 2% over a typical six-month period. But that doesn't mean you should ignore this market altogether...
Buying after a breakout like today's has often been a smart move. Similar instances have led to 4% gains in one month, 5% gains in three months, and a solid 10% gain over a typical six-month period. That crushes investors who simply bought and held over that period.
Chinese stocks are near new highs today. But don't let that scare you. It's a fantastic sign for investors going forward.
We've only seen breakouts like this a handful of times since 2000. And history tells us this market's rally can continue to even higher highs.
Good investing,
Chris Igou
Further Reading
"The coronavirus pandemic either shut down or severely impaired most of the economy," Brian Tycangco writes. The only exception to this has been the technology sector. But America isn't the only place where technology is growing by leaps and bounds... Read more here: This Opens the Floodgates to the 'New Nasdaq.'
"The problem is, bias against China could be costing you a lot of money," Brian says. With all the negative attention China gets from the mainstream media, there's probably a lot you don't know about the country. Learn more about what the U.S. media isn't telling you when it comes to China's leading tech companies right here.
Chinese stocks are booming. And despite the negative headlines you see about China, a certain part of this market is doing even better...
HIGHS AND LOWS
NEW HIGHS OF NOTE LAST WEEK
Simulations Plus (SLP)... software "picks and shovels"
Advanced Micro Devices (AMD)... semiconductors
Taiwan Semiconductor Manufacturing (TSM)... semiconductors
Quest Diagnostics (DGX)... medical data
Costco Wholesale (COST)... membership-only stores
Dollar General (DG)... discount retailer
Boston Beer (SAM)... beer
McCormick (MKC)... spices
Home Depot (HD)... home improvement
Masco (MAS)... "fixer upper" stock
Lennox (LII)... HVAC systems
Rollins (ROL)... pest control
American Water Works (AWK)... utility stocks
Flutter Entertainment (PDYPY)... "vice" stocks
Wheaton Precious Metals (WPM)... precious metals
NEW LOWS OF NOTE LAST WEEK
Not many... Stocks have been rallying in recent weeks.
