Bili (Long) - Rebound in Chinese market

21 mar 2023

Fundamentals:

• China was the first economy to enter recession back in 2021. The data is scarce but the damage was substantial, especially in the tech sector. However, the country is now coming out of the recession, hence it will start performing better
  
• The government is expected to start increasing liquidity in the market, which is highly positive for long-duration tech stocks like Bili
  
• The financial situation of the company is not the rosiest, but it on a high-growth trajectory, with the earnings expected to rise by 75% next year
  

Technicals:

• Things really do line up from a technical perspective
  
• On the weekly, we can see a solid head-and-shoulder formation which has been forming for over a year (longer time frame - higher conviction); the stock price has crossed 50SMA, MACD is crossing zero and RSI is getting ready to break 60
  
• On the daily we get the same picture. On balance volume indicator shows that up-days have been much stronger on aggregate
  

Trade:

• I have entered the position a little earlier but the stock here still offers a solid risk/reward ratio
  
• The recommended stop-loss would be under the H&S formation
  
• It is also vital to watch how the overall Chinese market is doing, in order to get early signals of trouble or under/over performance
  

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