MOMO (Long) - Undervalued star of the Chinese Digital Frontier
Fundamentals
Technicals
Trade
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- Chinese markets have been underperforming recently, however, some stocks, like
MOMO
, have been holding up. The Chinese officials have enacted an important easing measure this week to prop up the property market, and the Chinese markets have seen a reversal which might have (at least short-term) legs
-
MOMO
is an excellent company with a cheap valuation (P/E = 9) and a strong growth; net income is up 35% yoy and increasing profit margins
- The company became profitable with earnings expected to grow strongly
- Low debt levels and high profit targets from banks; JPMorgan also has a substantial position in MOMO and they have been increasing it in recent weeks
Technicals
- The chart has been basing for for a couple of months getting ready for a breakout; especially on the weekly chart, with a robust base, getting propped up by moving averages
- The price tried to go down several times and always got bought back up; the company released strong earning a few days back, giving it a green light to go higher
- The indicators on the daily also show that the stock has been being accumulated over this whole time with the Chaikin money flow strongly in positive territory
- I have been watching the price action rigorously for two months and the stock has strong support at the bottom; buyers always reacting with strong buying at the bottoms and quick reversals
Trade
- The safer way to enter is to wait for the breakout, but higher-conviction investors, like myself, can start buying now
- MOMO is a volatile stock, so to keep thee stoploss at the bottom of the base requires strong stomach; one can also wait for the breakout and use the zone around the black line for a stoploss
- I have bought after the second reversal and have recently increased the position
- Advantageous is also a stronger performance in other internet stocks (
VIPS
PDD
) as well as the reversal in the index
- Caveats: mainly fake breakouts and weakness in the Chinese markets (which has been substantial in recent weeks; the data coming out of China is pretty tragic)
Follow me for more analysis & Feel free to ask any questions you have, I am happy to help
If you like my content, Please leave a like, comment or a donation, it motivates me to keep producing ideas, thank you :)