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Liquidity Rally Could Lift China-Based Stock

by OptionsGal
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The latest stock picks from this week’s playbook are bullish plays on VIPS

Below is an excerpt from this Monday’s episode. Schaefer’s playbook of the week, featuring Matthew Tinpein, Senior Market Strategist at Shafer. Below, Matthew makes a bullish argument against China-based companies. Vipshop Holdings Ltd (NYSE: VIPS)VIPS is already up 3.5% in the first two trading days of the week.

I wouldn’t blame anyone for not taking this trade just because the market is so uncertain. In this day and age, being cautious and conservative isn’t a bad thing.

If you are not a fast trader, you should be more cautious. But if you are quick, you have a good chance as below.


VIPS are aimed at the potential for increased liquidity. If the dollar collapses, this would be very bullish for emerging markets, and Chinese e-retailers are already holding up better than other China-based companies.

VIPS is in a bullish pattern with a return to $14. We have regained the 20-day moving average. Now we want to see his VWAP level year-to-date and any moves above his 50-day trendline. Stocks are on the volume shelf, so for a name like VIPS, a crash in the dollar can be very bullish. The stock is also holding most of the short term moving averages curling higher.

Many people are shorting this stock in the options space. On the International Stock Exchange (ISE), Cboe Options Exchange (CBOE) and NASDAQ OMX PHLX (PHLX), the stock’s 10-day put/call volume ratio was 1.68, above 82% of its annual reading. Smaller retail traders are betting bearishly as these flows are not institutional.

Digging deeper, the peak put open interest remained at $15 after March’s expiration, so market makers expect VIPS to surpass that level in the coming weeks.

According to VIPS’ Shepherd’s Volatility Index (SVI), 48% of options ranked in the 8th percentile over the past 12 months look very affordable.

Join Schaeffer’s Playbook of the Week now and tune in every Monday at 8:30am to prepare for Trading Week with me. Click here for more information to get started.

Schaefer's playbook of the week

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