Your top stocks to watch this week are five China stocks with compelling chart action amid positive China trade data: Alibaba (BABA), NetEase (NTES), Autohome (ATHM), Tencent Music (TME) and UP Fintech (TIGR). Alibaba stock is in buy range after a breakout Friday, and its chart action is similar to that of Apple (AAPL). Autohome is shaping a new handle, while Tencent Music is presenting an add-on buying opportunity. Meanwhile, NetEase and UP Fintech are slightly extended from buy range.
Top Stocks To Watch: China Stocks
Autohome leads this group of top stocks to watch with an IBD Composite Rating of 98 out of a best-possible 99. Alibaba earns a 97, while Tencent Music has a 92 and NetEase an 87. UP Fintech lags with a 61, primarily due to its lack of profitability. The Composite Rating looks at key fundamental and technical metrics including earnings growth, profit margins and relative price performance.
When you’re scanning for top stocks to watch, looking at the Composite Rating is one way to quickly spot leadership. But it’s important to do an in-depth analysis of the chart and the company’s fundamentals before buying.
Alibaba stock broke out of a cup-with-handle base on Friday, and is 0.4% above the 188.18 buy point. Volume was average. It’s key to see strong volume on a breakout, at least 40% to 50% higher than average.
Alibaba’s base has a key similarity to the cup-with-handle base that Apple stock recently cleared. Like Apple, the depth of Alibaba’s base is 39%. Our research shows that bases with a depth of 40% or more have a higher chance of failing.
The relative strength line for Alibaba is lower now than where it was at the start of the handle, even though the stock is at a higher price. That signals underperformance.
NetEase is slightly extended from buy range, trading 6% above a 258.82 buy point. Shares broke out above that level with a 3.6% gain in heavy turnover on April 4. Investors should note that, like Alibaba, the relative strength line for NetEase stock is also lagging.
The Chinese gaming company appears to be undergoing a turnaround, with a 22% earnings gain in the most recent quarter ending a four-quarter streak of heavy declines on the bottom line.
Autohome is extended from a cup-with-handle buy point of 96.25 within a larger consolidation. But an alternate entry is forming at 111.70, a handle from that larger, 49%-deep cup base. The Chinese car-buying stock is 3.7% below that level.
The relative strength line for Autohome has been moving steadily higher in 2019, but is still below all-time highs from last June.
Tencent Music Stock
Tencent Music, a December 2018 IPO, is rebounding after a trip to the 10-week line. This is the second time the company has done so since breaking out in January, and is therefore considered an add-on buying opportunity.
Aggressive investors may also consider this a chance to start a new position. And while the new issue is already profitable, IPO stock Tencent Music gapped down more than 10% on its last quarterly report.
UP Fintech Stock
UP Fintech, which went public on March 20, is 5.5% above a 16.70 buy point from a very short IPO base. The Chinese online brokerage platform, known as “Tiger Brokers” in Asia, has already risen 120% from its IPO price of 8.
UP Fintech is not yet profitable, but it has very strong sales growth. That’s a hallmark trait of top IPO stocks.
China Trade Data
These China stocks were boosted Friday by positive China trade data. Chinese exports for the month of March were much higher than expected, as was China’s overall trade surplus.
Please follow Alissa Coram on Twitter at @IBD_ACoram for technical analysis and stock market updates.
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