Entry levels to watch on MCHIThe MCHI China index has been plummeting due to the coronavirus outbreak, which has many Chinese cities on lockdown today. Also hard-hit by the coronavirus outbreak are shipping companies and airline companies and the crude oil producers who serve them. The odds are good that the story will get worse before it gets better. Not only are we likely to see more Chinese cities quarantined, but other nations are also likely to see more cases. We've had two in the US so far. Now's a decent time to be long on gold or short on stocks related to China, shipping, travel, or oil. Personally, I am mostly out of the market until the situation normalizes.
However, it's not too early to think about re-entry, especially into China stocks and ETFs that have already taken big price hits. MCHI has a high-volume node at around $59/share that ought to offer some support at that level. That would be a great place to add shares of this fund. If the fund falls further, to $54-55, it might be time to consider a leveraged entry into the Direxion Daily China Bull ETF, YINN. Of course, you'll have to use your judgment regarding fear levels and headline risk whenever the fund hits one of these levels. You'll want to wait to re-enter until the bad headlines are slowing down and the fear has started to burn itself out.
In the meantime, I'm holding some GDXJ and YANG over the weekend, though not in large amounts. After all, there's always the possibility that they'll get a handle on the virus over the weekend and the headlines will be good.
