Golden Trading and Investing Strategies

Tencent 2Q Net Proft Grows 37%, Online Game Revenue rises 40%

Tencent profit tops forecast as fintech and cloud revenues surge - Reuters

Tencent on Wednesday reported results for the three months through to the end of June that beat analyst expectations in one of the fastest revenue-growing quarters in two years.

Gaming boosted overall revenue while Tencent saw some weakness in its advertising business.

Revenue: 114.88 billion yuan ($16.53 billion) vs 112.72 billion yuan expected. That’s a 29% year-on-year rise, the fastest growth since the second quarter of 2018.

Profit attributable to equity holders of the company: 33.1 billion yuan vs 27.56 billion yuan expected. That’s a 37% year-on-year rise.

Source: CNBC

Mirroring the US tech stocks, Tencent has posted revenue that has beaten analyst's expectations for their Q2 results and particularly important during the pandemic period. Forward looking, it is expected that it will likely continue to perform well in its gaming area but one key concern to take note is the US China tension as the US government may continue to target Chinese companies and Tencent is likely going to be one of those companies.

Looking at the price performance of Tencent today after its earning announcement, it opened higher at 528 but it seems that it has retracted during lunch hour. If positive news does not boost the price, bad news would likely push it even lower and we will need to continue to monitor for the next few days/weeks.

Disclaimer: Whatever posted here is purely my personal view. It is not an inducement to trade and not responsible for any losses. Tips and News might just be rumors in the market. I take no responsibility for any gains or losses as a result of reading my analyses, judgement and opinions. Trade with care and diligence please!

Hang Seng Tech Index closing 1.67% lower

The Trading Floor of the Hong Kong Stock Exchange in 1995, closed in 2017 [3200x1870] : RoomPorn

Hang Seng Tech Index is now down 3 days in a row, today closing at -1.67% lower. At one point in time, the index was as low as 6,833.88 with all the constituent stocks in the red. If you noticed once it crossed through 7,000, the rebound is pretty fast and started its consolidation before making an up move.

It seems like 7,000 is the support level at this point in time and should hold when it touches or pierce through this level.

Courtesy of AAStocks

Looking at the gainers for today, Sunny Optical and Tencent popped a gain of more than 1% and at one point in time, both were negative and close to its moving average (20MA for Sunny and 50MA for Tencent) before rebounding higher. Tencent will be announcing their results today and we will see if it will help push the prices higher for the rest of the week and at the same time, whether there are any geo political tension between China and US to negate any good news.

Courtesy of AAStocks

Losers for today are primarily Hua Hong and China Lit where they have dropped -10.843% and -9.486% respectively. At one point in time, Hua Hong was down close to 17% before closing at 29.60. The losers however are small cap companies as you can see as compared to the top 5 gainers so we will need to monitor closely how the big cap companies will try to hold up the index.

Courtesy of AAStocks

Is the Gold and Silver run over?

How to Invest in Gold and Silver: Surviving A Market Crash

It's been a while but yesterday's move during US market hours saw the massive sell down for Gold and Silver where Gold Futures is currently trading at 1923.70 and Silver Futures at 25.28. The current news on why precious metals has taken a hit was due to the vaccine that Russia has indicated and resulting in equities being more favorable than safe havens. It is important to monitor the price action for the next few days/weeks as we may see more downward action for precious metals considering its parabolic move to the upside over the past 2 weeks.

Looking at GLD chart, it has dropped a good -5.37% overnight and close below its 20MA for the first time after many days. It may look to correct even further if more positive news on the vaccine continues to be published. First level of support may be at 173.74 at 61.8% Fibonacci retracement. There was sideways accumulation at around 168.25 and it may be another level, though the period is not that long (6-7 trading days).

GLD Daily

Silver really took a beatnig last night, plunging -13.59% in a single day. Its first breakout point was at 22.62 (the long green bar on 4 Aug) and we will need to see the price action today to determine if it will close above that price level. If this continues to close below, we are looking at the next level at 21.54 which is a gap fill.

SLV Daily

Where are we now in the Business Cycle?

A2P SMS and chat apps are increasingly favored by enterprise businesses | The Drum

Amidst all the doom and gloom from the various news media on COVID-19 and the impact on Q2 GDP from each region and the increasing number of job losses, what does it mean for all of us?

As shared in my previous post, GDP for Q2 were totally decimated and likely so as most of the major developed countries went through a national lock down and most businesses were unable to operate in such a mode since March to May. It was also noted that almost $11 billion in GDP was lost during the lock down.

The diagram above shows a typical business cycle where we see growth, stabilization, decline, recession and slump, recovery and growth again. As news media normally does not analyze or perform forward looking views, we are normally looking at historical data/information that they will present. In this case we were all looking at Q2 GDP numbers and recent earning reports from major US companies for Q2. Even for job losses and retrenchments, these are backward looking information as well. If one uses the news media as the basis, we would think that we are at the start of the recession cycle.

Frankly I was unable to find more data points to determine exactly where we are at, but based on the weekly job claims which shows a smaller number on a weekly basis, we would see that it should be at the lower end of the recession than the higher end as job losses should intensify at the start of the cycle and not at the end of the cycle. Looking at this Bloomberg article posted in July, we see a large number of businesses closing down and again, this is historical information and not real time information as we do not have the information on how many businesses are closing down at this point in time and how many businesses are potentially created as well.

Source: Bloomberg

With countries opening up and businesses starting to resume, this should mean we are close to the bottom or start of the recovery. One condition that may result in the start of the recession trend would likely be another lock down which will likely resume in business closure of existing companies as lock down only benefits certain companies like Amazon but not the broader mom and pop shops. The Stock market is normally a barometer of the future and thus we are seeing a broader up move despite all the doom and gloom in the news media.

US Market notes on Energy on 11 August

As per my previous post on 28 July, Financials and Energy sector has been the area I have noticed to be a laggard and would have a higher probability of a upward move.

Energy ETF (XLE) is holding its uptrend on a daily chart movement even though Energy stocks as a whole didn't perform well in the closing hours. Large energy companies like Exxon, Chervon was up more than 2% during the day before it gave way slightly with Exxon still holding up its gain at +1.03% and Chervon down by -0.12%.

XLE Daily

Again, Nasdaq was down with all the big Tech names dropping almost more than 2% like Apple, Microsoft, Facebook and Nvidia but Financials again took a good gain today. This is showing a broadening sign across the markets which is good in the long run. It may also pose some opportunities to look at accumulating some of the tech stocks like Apple, Microsoft during this distribution period. My personal preference would be Apple but it would be a different entry at this current price and also considering that it is due for a stock split by end of the month.

Hang Seng Tech Index closing -0.65% lower

Hang Seng Tech Index closed lower for two days in a row, today at -0.65% lower. It was positive during the start of the day before it started to sell down about 1 hour into its opening and ended lower after lunch hour.

Top gainers for today are Leveno and Fit Hon Teng which both are up more than 4% today. Tencent also staged a recovery today, reversing its downtrend with a close of +2.291%. It was at a high of 526 early today before it started to retract back to a low of 510 and eventually closing slightly higher at 513.50. Take note that Tencent will be reporting its earnings on 12 August and will see if good news can push its price higher.

Top losers for today are Koolearn where it fell -7.343%. Overall there are more losers than winners in the HSTI composite and it did not show too much weakness considering Tencent and Alibaba's gain squared off Meituan and Xiaomi's losses.

Courtesy of AAStocks

US Market Notes on Financials for 10 August

Bank of America may be as profitable as J.P. Morgan in two years, analyst says - MarketWatch

As per my previous post on 28 July, Financials and Energy sector has been the area I have noticed to be a laggard and would have a higher probability of a upward move.

If we look at the XLF (Financial ETF), it looks to have been consolidating for a period of time and during that period, big tech stocks have been making major moves. Looking at yesterday's movements, we can see that there is money flowing out from the Tech sector and moving into Energy and Financials. I will cover the Energy sector in a separate post.

XLF Daily

Notably, Bank of America has been consolidating upwards since 20 July and JP Morgan has been consolidating sideways since 13 July. Looking at Bond yields, it is currently at its all time lows and it might potentially move up as it is considered a flight to safety during the whole US China tension.

Looking at the daily chart of BAC, it is likely to touch the 200MA at 28 and the last time it did it went tumbling down so we will need to see if it can break out this time. It is technically a gap fill for the big fall in March if you can see from the charts.

BAC Daily

The chart for JPM is looking pretty ok, with a sideway consolidation over several trading days and we would likely see a move soon if it continues to consolidate at this range. Similar to BAC, there is a gap fill in March and we would likely see resistance when it starts to move up to the 200MA.

JPM Daily

Tencent and what's next?

Tencent loses US$35 billion as WeChat ban rocks China stocks, yuan

If you have referred to my previous post on the impact to Tencent, Bank of America has also indicated in its assessment today that the impact would be minimal as I have indicated and BofA highlighted that there were about 5.9 million WeChat users in the US who were mostly Chinese immigrants and students, being less than 1% of total WeChat users with low monetization rate. As rationale as we can be, the stock market isn't that rationale and we are likely to see more volatility in the price action for Tencent.

Source: AAStocks

Volume: Looking at its daily chart, it looks pretty bearish for the past 2 days with selling volume of 62 million and 48 million, 2-3x more of its average volume of 15 million per trading day. The last time we saw such volume is during March where the markets dropped severely and volume on a daily basis back then was 40-60 million on average over 9 trading days.

Trend: It has breached its 20MA easily on 7 August and continued to close before its 20MA today. However if you noticed, when it nearly touched its 50MA for the 2 trading days, it did show support to not break its 50MA. We will need to monitor if the 50MA can hold and if it does, we would likely see 538 as its first resistance point at the 20MA. If it doesn't, the next level is likely at the 61.8% Fibonacci at 474.26.

We will need to monitor the geo-political situation between US and China as US is targeting one of the biggest China company and we may expect China to target likely in this case, Apple for whatever reason it can think of to make life difficult.

My view on this is that as this tit for tat prolongs, it does not really help the current US president in his quest for re-election as the US Business leaders will likely find it extremely difficult to work with their Chinese counterparts and potentially lose out on the Chinese market. The Chinese normally works on relationships and to repair relationships will take years.

Hang Seng Tech Index closing 2.85% lower

Courtesy of AAStocks

Markets were not kind to the Tech Index today, choppy session throughout the day and closing -2.85% lower withe BYD, SMIC and Tencent leading the fall. As Tencent is the largest constituent stock for HSTI, it did result in the big fall for the index and due to the news that continues to circle around the impact on Tencent with WeChat potentially to be banned in US.

Gainers for today are only two which is HENGTEN and MEITUAN. Meituan was up more than 1% throughout the day before closing at +0.27%.

Courtesy of AAStocks

Hang Seng Tech Index closing 2.51% lower

Courtesy of AAStocks

After 5 days of positive gains, HSTI has close negative for today, at -2.51%.

Today's biggest winner is BYD where it went up by an impressive +5.016% when HSI and HSTI was really hammered primarily due to the news on US banning US transactions with TikTok and WeChat in 45 days time. Meituan also did a reversal for today, within its low at 208, it managed to close positive at 222.40, with an intraday gain of +6.92%!

With the headlines flashing WeChat and TikTok, we would have thought that Tencent would be the biggest loser for today. Tencent did at one point in time, dropped 10% and breaking the 500 mark, touching 499.4 before rebounding back up after lunch hour. Today's biggest loser is actually SMIC where it closed -8.702%.

Referring to my previous post, I believe the overselling in Tencent would create an opportunity for one to enter as the WeChat population in US is not that big and the US officials came out and say that it is only for WeChat and not its gaming channels. Though the risk of the gaming channels may be the next target by the US government, there are some potential swing in price action for Tencent for the next few trading days. What would China do in this hostile situation?

Top gainers

Top losers

Courtesy of AAStocks

Key Lessons

Rule number one: Don’t lose money. Rule number two: Don’t forget rule number one.
It is not about how the stock prices open but more importantly how it closes for the day and week.
When people are greedy, its time to be fearful. When people are fearful, its time to be greedy.
The trend is your friend till the end.
Investing should be more like watching paint dry or watching grass grow. If you want excitement, take $800 and go to Las Vegas.
When the semiconductors fail, you better bail.