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A few weeks ago, I shared my thoughts on how Trump’s presidency could turn out to be bullish for the Chinese equity market. 

I’m still very much in this camp, but now I want to take it a step further, especially after recent headlines of individuals like David Tepper boosting his allocation to China.

I can’t say whether Tepper sees what I see, but I do know that there is a very specific theme brewing in that country, and it’s what I want to share with you today. 

Check this out…

Follow the Money Flows

In my time here at TheoTrade, many have heard me say that I want to own the strongest stocks in the strongest sectors in the strongest countries.

Well it just so happens that for a majority of this time, the strongest country has been the United States, which has kept our focus at a domestic level.

But U.S. stocks have lagged somewhat to start the year. This could be temporary, or the start of something much bigger. We’ll know soon enough.In the meantime, the developments we’re seeing in China are impossible to ignore. If you take a look at this ratio chart between China and the U.S., a clear downtrend is observed. I talk about the usefulness of these charts in the Trinity Trade, but to keep it very simple for you, when the line is dropping, it favors the U.S., when it’s rising, it favors China.

We can see how the trend could be starting to change in favor of China, which leads me to my next point - which sectors should we focus on in that country? Once we narrow that down, we can start looking for the strongest stocks in that sector.

This next chart looks at the ratio between Chinese internet stocks compared to the overall Chinese market. In this case, if the line is dropping, it means Chinese internet stocks are lagging. If it’s rising, it means that Chinese internet stocks are rising.

There’s still some work to do on this chart, but as you can see, Chinese internet stocks have held their own over the past couple of years compared to their peers. I think this is shaping up to become a major theme across the Pacific Ocean, and it’s a big reason why we backed up the truck on this name over a month ago. 

I’ve been increasing my exposure to this country and this sector in TheoTrade’s live room and of course in the Trinity Trade. If these trends continue, I suspect there will be a lot more setups to come.

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