We will wait before taking action on Chinese Stocks.

NYSE:BABA   Alibaba Group Holdings Ltd.
Today we will take a look at BABA. When do we think maybe a good moment to start adding Chinese stocks into our portfolio?

Of course, we will look at the answer from a technical perspective, and this is the conclusion we make:

a) We must see contact with the support level first (Is there buying pressure?)

b) If we see bullish pressure, that is the first sign those big investors may be adding again.

c) Ok, that's the first filter; the second filter is the breakout of the descending trendline. That would mean a change in behavior or sentiment. Now the price can stabilize and avoid the previous decreasing angle in price.

d) Cool, can I buy it now? You can buy whenever you want; however, we will not do that; we want to see our 3rd filter. Corrective Pattern after the contact on the support level + breakout of the descending trendline. It's pretty standard after we observer a breakout of a key level (in this case, the descending trendline), a lot of FOMO comes to the market. "Chinese Stocks are booming! I will not miss this..." And most of the time, those traders or investors get trapped on a correction.

e) So if all the previous filters happen, we will develop long setups on BABA.

f) Patience is key when looking for quality setups; you can't ask the market for opportunities; you need to wait until the market provides one.

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