Weekly first. As oversold today as on two previous occasions: 2015 RMB devaluation & 2018 trade war.
Momentum most oversold since IPO, volumes spikes highest since IPO.
We like to buy oversold when others panic (volume spikes)!
The long-term daily chart next.
A cluster of support levels between $130 and $150 price range.
Recent panic selling saw the lowest relative strength & momentum on record.
Price is very far from the 1-year mean (red line), indicating the possibility of a mean reversion.
Alibaba's HK price is up over 7% today.
Typical price thrust anticipated by bullish divergences everywhere.
Selling exhaustion seems to have run course. Why?
The onslaught of bad news out of China, yet $KWEB not making new lows!
Bears "had" their moment of glory. Is it over?
Technical analysis helps understand the behavior of investors while the fundamentals help in understanding the business, its competitive advantages, growth trajectory, and its financial strength.
None of this is predictive, rather it is about odds.
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Evergrande should have defaulted years ago, so this isn't a surprise.
As an investor, I do hope the Chinese don't follow the footsteps of the West, especially the Europeans, who bailed everything and everyone out — creating a zombie economy.
Risks haven't been there for only a month, they have been there for a long time.
If the Chinese economy goes through a property market de-leveraging, it will be very painful in the short term, but create a fantastic buying opportunity.
To become a great investor, focus on a multidisciplinary mindset (become a generalist).
"Most of us study something specific and don’t get exposure to the big ideas of other disciplines. We don’t develop the multidisciplinary mindset that we need to accurately see a problem."
"An engineer will often think in terms of systems by default.
A psychologist will think in terms of incentives.
A business person might think in terms of opportunity cost & risk-reward.
Through their disciplines, each of these people sees part of the situation."
Applying a "multidisciplinary mindset" forces inspiring portfolio managers to have knowledge in psychology & human behavior, ancient & modern history, fundamental securities analysis, accounting, macroeconomics, experience in negotiating, running a business, and so much more.
Our portfolio allocation is somewhat planned, but to a great extent very much accidental, as it's based upon "value" offered in different assets, regions & capital stack positions at any given time in the cycle.
In other words, it is more of an art than science.
It can be added that many other market participants do not behave under such mandate, since they are far more authoritarian in their allocation approach.
Rather than searching for value currently on offer, they'll keep buying overpriced assets as it's within their comfort zone.
Flexibility & patience are our edges to mitigate risks & outperform.
As public equities become overpriced we're likely to sidestep into real estate. And when it becomes overpriced, we'll consider special niches like litigation funding, mezzanine debt, or distressed PE deals.