| WE WANT TO HEAR FROM YOU I do a ton of sector analysis and use back-tested, proven strategies to beat the market. I use proprietary formulas based on relative strength to track the top 5 strongest stocks… You know, the ones I send you in my new weekly watchlist. But now I want to know which stocks you'd like to see rankings for! All you have to do is reply directly to this email with your tickers!
Now, on to the Weekender!
It's become increasingly clear this week that investors must tread carefully when it comes to China stocks...
Chinese tech-education companies continued their decline this week as investors remain unnerved by Beijing's growing crackdowns on its own companies. As a result, Hong Kong's Hang Seng Index was down more than 8% at one point this week before rallying.
I can't say I'm shocked to see this happening because... Joy of the Trade Head Trader Jeff Zananiri alerted us to this possibility months ago.
As he mentioned to his readers Monday, it seems everything came to a head this past weekend when China announced new reforms for private education companies in an effort to decrease student workloads and dismantle a sector it believes has been "hijacked by capital."
The government basically banned the entire industry of online education, causing the China stock market sell-off to start with a swift and panicked thud.
Is a Global Crash Next?
The stock market did not react well to China eradicating a $100 billion dollar industry from its own country.
The KraneShares CSI China Internet ETF (NYSEArca: KWEB) fell as far as 14% this week, and Alibaba Group Holding Ltd (NYSE: BABA) hit lows investors haven't seen since March 2020.
To us Western capitalist-thinking people, this move seems irrational and counter-intuitive. This move says the Chinese government just doesn't care. It doesn't have the same values as us, and doesn't want to play the same game.
Well, we don't want to play Beijing's game — and neither do investors.
Because they play by different rules, and Jeff is wary of the chaos that could ensue — we're in the early stages still.
In the coming months, he sees more pressure on China's big tech companies, big pressure on Chinese companies that are listing outside of China to acquire capital from the Western world and…
In the long term, something that could impact our investors...
Jeff expects the Chinese government to start messing with international companies that play ball in China. Will they put the brakes on those that grow too quickly in the vein of Tesla or Apple? He thinks so.
We're not saying to panic or jump out of any businesses that work in China, but limit your exposure and pay attention.
I hope that helps!
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2 Stocks to Trade When the Market Gets Ugly
Despite U.S. gross domestic product hitting 6.5% and companies reporting earnings growth that's way up, there's still rampant inflation.
It doesn't matter where you are.
If you have your head up in this world, there's inflation. I mean, the Federal Reserve just told us it increased 5.4% during June from the same reading a year ago.
And it has a lot of traders and investors uneasy about the future...
But because it's my job to help you guys figure these things out, I'll show you the best stocks to own if markets turn sour. Now, these are highly defensive stocks traders add to their portfolios during times of uncertainty, which is exactly what we have right now.
Protect Yourself With These Names
◾ Mondelez International Inc. (Nasdaq: MDLZ): This company is a sneaky pick for a stock, but it's a massive packaged food manufacturer. If you don't recognize the name, let me give you a taste: Oreo, Nabisco, Philadelphia Cream Cheese, Kraft cheese, Oscar Mayer… the list goes on. Even though the stock had a down day Wednesday, if you look at a six-month chart, you can see it's still trending upward. And looking way back at the five-year chart, the stock is breaking out to all-time highs. The question now is why would a boring consumer staples stock be making highs?
The simple answer is the return of COVID-19 fears. No matter what happens, whether we enter another lockdown or not, people are going to buy their Oreos, their Nabiscos… heck, I'll buy Oscar Mayer hot dogs even if I'm in a shelter 50 feet underground! The company has seen four consecutive quarters of positive earnings estimates and surprises, as well as 12 beats of analyst expectations. With a price target around $75 over the next 12 weeks or so, I love this stock.
◾ Philip Morris International Inc. (NYSE: PM): Who can tell me what Philip Morris does? That's right, it's the biggest tobacco company in the world. You may know someone who smokes Marlboros. The reason I love this as a defensive stock is simple statistics: When markets and the economy go south, people start smoking due to stress — I'm not teaching you anything new here. Additionally, large funds tend to start buying up defensive stocks — like PM — when there's a good chance markets will go through a turbulent period.
The stock is currently trading roughly $25 below it's all-time high of $125. On a weekly basis, the 50-day moving average is crossing the 200-day moving average, which is a bullish sign (golden cross). With four quarters of better-than-expected earnings and estimates, I'm a fan of PM as a defensive play. I have a price target around $117 a share, and it's hovering around $100 right now — so that move up isn't the end of the world.
Signing Off
If you're looking for more compelling trade ideas and stock market musings to help you prepare for what lies ahead, here's what other experts at WealthPress are saying:
Thanks for being a MarketWealth reader and enjoy the rest of your weekend!
Roger Scott MarketWealth | 
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