A question comes into DailyWealth: OK... so the "China bears" are now in control. How can I make money here?
Answer: Take a look at the short China fund. It's displaying some classic "trend exhaustion."
Below is the past 15 months of trading in the short China fund (FXP). This fund declines when Chinese stocks rise and rises when Chinese stocks decline. As you can see, this fund suffered a monster downtrend as Chinese stocks rallied in 2009. FXP falls when Chinese stocks rise, and it fell from over $180 per share to less than $8.
Stocks and funds that have gotten this beaten down make some of the world's greatest trading vehicles. Even the strongest trends (down or up) "get sick." They get old and exhausted. When an asset is this depressed, it takes just a bit of "less bad" conditions to kick off a 50% rally. And as our colleague Jeff Clark noted in this brilliant essay, it can also create big opportunities for income investors...
Answer: Take a look at the short China fund. It's displaying some classic "trend exhaustion."
Below is the past 15 months of trading in the short China fund (FXP). This fund declines when Chinese stocks rise and rises when Chinese stocks decline. As you can see, this fund suffered a monster downtrend as Chinese stocks rallied in 2009. FXP falls when Chinese stocks rise, and it fell from over $180 per share to less than $8.
Stocks and funds that have gotten this beaten down make some of the world's greatest trading vehicles. Even the strongest trends (down or up) "get sick." They get old and exhausted. When an asset is this depressed, it takes just a bit of "less bad" conditions to kick off a 50% rally. And as our colleague Jeff Clark noted in this brilliant essay, it can also create big opportunities for income investors...
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