Big move in Chinese tech

11/15/19
  • SINA and WB dropped sharply after releasing earnings
  • SINA beat its numbers, WB had mixed results
  • Some analysts bullish on opportunities in battered Chinese tech

If Chinese tech stocks are oversold—and some analysts argue these casualties of the US-China trade war fall into that category1—a couple of names that are even more discounted than they were 48 hours ago may be flashing on trader radar screens.

Those perusing yesterday’s biggest down moves may have noticed that Sina (SINA) and Weibo (WB) were both toward the top of the list:

Chart 1: LiveAction scan: Biggest percentage losers, 11/14/19. Lost ground post-earnings.

Source: Power E*TRADE


But some traders may not have been aware that these companies had more in common than double-digit percentage losses. Aside from the fact that both released earnings yesterday, Chinese internet company Sina is a 15% stakeholder in Weibo (sometimes referred to as the “Twitter of China”).

And while WB posted mixed results (beating earnings but missing its revenue estimate),2 SINA pretty much knocked it out of the park, topping earnings by around 68% ($0.94/share vs. $0.56 estimated) and exceeding projected revenues, too.3

That didn’t stop SINA shares from dropping more than 17%, coming close to their August bottom around $33—the stock’s lowest level in more than four years:

Chart 2: Sina (SINA), 7/23/19–11/14/19. Fell close to four-year low

Source: Power E*TRADE


If this technical picture sounds familiar, that’s because in many respects it mirrors the situation discussed in this space yesterday—a down-trending stock (GDOT) that sold off after earnings, only to immediately rebound—except that in this case, we’re looking at stocks immediately after earnings, not four days later.

Given SINA is close to an important support level (the August lows), and at least some of yesterday’s initial reaction to its positive earnings numbers could be attributed to WB’s mixed performance, some bulls may see the potential for the stock to rebound.

The following chart shows WB pulled back yesterday to its early–October lows around $43 (and some traders likely noticed this reversal occurred in the vicinity of a former support level that transitioned to resistance in September and October):

Chart 3: Weibo (WB), 9/17/18–11/14/19. Sell-off occurred as stock tested resistance

Source: Power E*TRADE


Aside from the possibility of a “relief rally” (similar to GDOT’s up move after its earnings decline), some bulls may also see the potential for upside follow-through in Chinese tech in the event the US and China ink an initial trade deal in the coming weeks.

And high-profile names trading at especially deep discounts could get extra attention from bulls.

Today’s numbers (all times ET): Retail Sales (8:30 a.m.), Empire State Manufacturing Survey (8:30 a.m.), Import and Export Prices (8:30 a.m.), Industrial Production (9:15 a.m.), Business Inventories (10 a.m.), Baker-Hughes oil rig count (1 p.m.).

Today’s earnings include: JD.com (JD).

 

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1 CNBC.com. China tech stocks are ‘screaming buys,’ Invesco’s Kristina Hooper says. 10/25/19.

2 Investor’s Business Daily. Sina Earnings Top Views, But Weibo Parent Falls. 11/13/19.

3 StreetInsider.com. Sina Corp. (SINA) Earnings. 11/14/19.

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