As always, I try not to publish trades without having a big view of multiple factors so this one is based on a long term view over the next 1-2 years.
Macro: I have outlined China's Central Bank (PBoC) liquidity injections (through reverse repo and MLF data) as very seasonal at the bottom pane on the chart. I do NOT believe history or seasonals should dictate future action but it is worth noting the seasonal nature of the PBoC liquidity injections and we are seeing an early rise in total and frequency since June. In fact, a recent print on 8/15 was the biggest spike since the height of 2023. China is also coming out of the rough no tolorence policy during the "pandemic" so some of their stocks are poised for major breakouts. That said, the U.S. M2 money supply is breaking out of a range with global liquidity on the rise heading into central bank easing around the world. No doubt we have some volatility in global liquidity ahead (US debt ceiling to name one) but the general trend is up and to the right over the next 2 years once we get through the vol.
Price Action: As I mentioned, the price of this stock has been on a downward trend since Fed Funds rates started moving up in 2021 and has completed the bearish bat making 3 consecutive higher highs since the low in 2023. Looking at Fibonacci the targets are clear but for target 2 I am looking at the massive gap from end of 2021. My first exit before the stop loss would be losing any of the recent higher highs and the S/L is set to under the 2023 low. However, I would rely on the macro section more than price action for the exit.
Timeline: I am a 3 month to many year investor not a day trader so this is one I will layer in and buy dips for the next few months. I did take a 5% position at the entry point noted. I do think the next 2-3 years will be net positive for liquidity and assets.
Thanks