After watching PCLN tear up the market, I couldn’t help but look for a more aggressive play within a related industry. My theory is that any big price movement in PCLN from here on will generate bigger moves in related stocks. In other words, the industry is back, and so I turn to somewhere aggressive…. China!
ZNH – China Southern Airlines Company
This “quiet stock” has been a favorite one to trade both long and short here on IBC. I remember getting long this in the single digits back in 09 with Ragin, but we took it off the table to trade something more exciting, like GMCR. It was a good move I guess, but if we held on, then ZNH would have more than doubled our investment. I never thought ZNH would be a good “investment”, but I understood it to be a good trading stock. Now it sits right about $22, up about 175% in a few months without even trying. A good lesson learned.
The pertinent question now is, do we buy or short ZNH right here? Two long-term charts tell two totally different stories. I’m not big on technicals, but ZNH right here is at a very important point.
1 year:
5-year (looks like crap)
I’ve been staring at the the price-volume pattern of ZNH over 1-year versus 5-years and there’s no reason why it can’t double again from here. But the confusing thing is that with a market cap of 3Bil the average daily volume is only 25k. This is fishy, and is usually a red flag for short sellers to attack.
Would you buy or sell here? I say sell, but I’m going to buy and watch this stock gain another 25%. Chinese bears don’t know how to time anything.
Finally, it looks like PCLN is in the beginning of another breakout…
Always great to read you Gio! Thanks for posting