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Could Futu Holdings and Pinduoduo be the bell cows of a new bull market

June 29, 2022

I have just had a ridiculous idea but it could be fun to run with it. I have been looking at my table of ETFs and the standout shares are nearly all China focused. It looks as though something is happening with China and this is a monster economy so if something is stirring in the Fast East that could be exciting.

I then come back to my recent article where I alerted Futu and Pinduoduo as my two favourite Chinese shares based on their combination of exciting charts and high-powered fundamentals. This is where my ridiculous idea comes from.

The lead cow in a herd of cows is known as ‘the bell cow’. It makes it easier to manage the herd. How bizarre it would be if Futu and Pinduoduo are the bell cows for the next bull market. They lead Chinese shares higher. Chinese tech shares lead US tech shares higher. US tech shares lead the indices higher and hey presto we are off to the races again.

This could all be a bit premature because we don’t yet have any Coppock indicators which are unequivocally heading higher, even for Chinese shares but it does seem as though Chinese shares are on the turn and there are other shares that are trying to build bases after heavy falls.

As well as recommending these two shares yet again I am adding a new one, Hang Seng Investment Management Tech index ETF. There is a UCITS alternative which is HSBC Hang Seng Tech (UCITS) with the code HSTC. Both trusts track an index which is invested in the 30 largest technology companies quoted in Hong Kong.

Futu Holdings. FUTU. Buy @ $52.94

Pinduoduo. PDD Buy @ $62.92

HSBC Hang Seng Technology ETF (UCITS) HSTC Buy @ 566.7p

Strategy

You probably think I am a bit fixated with Chinese shares but that is just a function of what is happening. I am trying to build a portfolio of Chinese shares in my spread betting account so if they do perform as hoped I will start to build some profits for reinvestment in other shares.

My idea is to have a decent position in the Chinese shares as and when their Coppock indicators start rising. I will then be able to ride the wave for months even years against the background of a rising Coppock. Throw in five times leverage and that could deliver some exciting returns.

But it gets better (God willing/ Inshallah as the Muslims like to say). If my theory is right and Chinese shares are the canaries in the mine signalling a new bull market then non-Chinese technology shares with classic 3G credentials are going to start to give buy signals and I will start building positions in them.

You could call this snowball investing and this ole snowball can become surprisingly large which is why the biography of Warren Buffett was called Snowball. The difference this time is that I am no longer even trying to pursue a never sell strategy. At some point all the shares I buy are going to give sell signals and they they will be sold. If I get the feeling that the whole stock market is losing its mojo and I am doing super well I may go totally liquid. But that is a way off since we don’t even have evidence yet of a new bull market.

On the contrary most of the important US technology shares still have forbidding looking charts with all my indicators pointing down and patterns suggesting lower levels ahead. It is very much a case of don’t shoot until you see the whites of their eyes. Don’t buy until we have shares with clear buy signals, at least two out of three and with Coppock indicators flattening out and showing potential for a change of direction. Except for the Chinese shares I am suggesting as toe in the water investments we don’t have anything yet.

The strategy I pursue only works with leverage and tax free spread betting accounts and that is increasingly the strategy I am going to focus on with Quentinvest which, at the end of the day, is designed to help me make money in the stock market.

If you guys want to use it to do something else that is obviously your call but I would strongly urge everybody to have a little bit in a spread betting account and see how it works. Remember also not to worry about margin calls unless you equity is approaching 50pc of your margin requirement which is the point at which IG will start selling to protect themselves.

Like my children I expect you all think I don’t know what I am talking about but what if I do. Thank you, by the way, to all the subscribers who sent messages after I asked if there was anyone out there. It is good to know you care and I really do want you to do well. We can work miracles here. We just need three things, discipline, discipline and discipline, which, at the moment means keeping your powder dry.

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