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Investment in China really took off when technology made it easier to invest overseas with the advent of online brokerages and American Depository Receipts (ADR)…certificates representing shares in foreign companies, traded on the U.S. exchanges.

And as China became an economic powerhouse, there was a surge of Chinese companies issuing ADRs to take advantage of the massive amount of capital on the U.S. stock exchanges.

Not only that, but the government allowed capitalism to grow mostly untouched.

After all, it was good for the people and country as a whole.

All of that has come into question recently with a major crackdown on tech companies coming out of China.

It started small, but has turned into a massive coup with ramifications way beyond the walls of China.

China’s Tech Wreck

ANT group

The Chinese government started a crackdown on its big tech giants last year, forcing Jack Ma’s Ant Group to pull its IPO.

Highly anticipated to be the biggest IPO ever… it was stopped in its tracks by Chinese regulators.

Why? It’s not totally understood. At the time, Jack Ma made some derogatory comments about the Chinese government…maybe it was a coincidence…

But Ma himself disappeared for months without a word. Kind of like a kid sent to their room without dinner.

To this day ANT Group still isn’t publicly traded.

China TechEdu

Then in February this year, reports of Chinese authorities conducting snap inspections of after-school tutoring institutions led to the beginning of a rout in the private education sector in China.

Next up, in March there was talk of banning the use of online education for students below seven years of age along with a potential ban of online education companies from advertising in Chinese state-owned media.

It didn’t stop there though, in May China issued the maximum penalties to two of the country’s fastest-growing tutoring apps for violating competition and pricing laws.

And Friday, news broke of China considering having companies that offer tutoring on the school curriculum to go non-profit…which could not only decimate the country’s $100 billion education tech industry, it could undermine foreign investors’ faith in China.

If this actually happens, nothing is safe.

Just look at the charts for two of the biggest names in Chinese internet education with big gap downs Friday and opening even lower this morning…the charts speak for themselves.

 

DIDI IPO

It really started to unravel a couple of weeks ago when Didi Global (DIDI) IPO’d on the NYSE.

Apparently Chinese authorities had questions for Didi before going public…and DIDI pushed forward without their blessing.

Shares hit $18.01 that day but never recovered after China’s response…removing the ride-hailing app from stores, and launching an investigation…and talk of serious penalties.

The penalties under consideration include a fine, suspension of some operations or the introduction of a state-owned investor, and DIDI may even be forced to delist its U.S. shares.

If they follow through with the threats, this is yet another recent move that will wreck investors’ confidence in China.

Investors now have to wonder if any U.S.-listed Chinese stock is safe?

Keep an eye on BABA, NIO, LI, XPEV JD, TAL, EDU, BILI, BIDU

Author: Jeff Williams

Jeff Williams is a full-time day trader with over 15 years experience. Thousands of entry-level and experienced traders alike – day-traders and swing-trade small cap stock traders – credit Jeff with guiding them to turning small accounts into big accounts.

Jeff’s "Small Account Challenge" shows people how to transform accounts from a few thousand dollars into $25k, $50k or even $100k.

I may trade in penny stock land, but that doesn’t mean I’m oblivious to the big name companies.

First off…any news that affects an industry will flow through to the small stocks within, so I’m always up on the latest regardless of market cap.

And second…in an instance like today, many times you’ll see small companies make headlines on deals with mega caps like AMZN. When a microcap gets its name next to a mega cap like that…the amount of attention soars.

Summit Wireless Technologies (WISA) is doing just that this morning, with the newly announced WiSA® custom branded Amazon Storefront.

Up over 40%, the stock is making new highs after bouncing off support at the 200 day MA on Monday.

 

Summit Wireless Technologies (WISA)

Summit Wireless Technologies (WISA) is a leading provider of immersive, wireless sound technology for intelligent devices and next generation home entertainment systems, working with leading CE brands and manufacturers such as Harman, LG Electronics, Klipsch, Bang & Olufsen, Xbox, and others.

Summit Wireless is also a founding member of WiSA®, the Wireless Speaker and Audio Association, dedicated to creating interoperability standards utilized by leading brands and manufacturers to deliver immersive sound via intelligent devices.

The key here is that WiSA Certified™ components from any member brand can be combined to dramatically increase the enjoyment of movies and video, music, sports, gaming/esports, and more.

And momentum for the stock has been gaining recently…with the culmination of today’s report of a new storefront on Amazon that will enable “all WiSA Certified™ products being sold on the Amazon platform to be purchased easily from one page, strengthening the customer experience.”

With only 9.28M shares in the float, per finviz, WISA can make big moves quickly and that’s important to keep in mind because it goes both ways…it can move up fast, but it can also move back down fast.

For that reason, I always exercise caution when looking for trades in stocks like this…relying mainly on chart patterns and other indicators to find a spot that works for me, rather than hype and excitement that causes many to chase stock prices higher.

Where did WISA come from?

This isn’t the first time I’ve covered WISA actually. Back in November, I wrote about the stock’s jump on corporate earnings…

When they announced:

  • 45% increase in Q3 2020 revenue, compared to Q3 2019
  • 17.1% gross margin in Q3 2020, up from 7.6% in Q3 2019
  • Management expects to exceed 100% revenue growth for Q4 2020 year-over-year
  • They also shared new business developments that will spur growth going forward.

Here’s the daily chart from back then…popping out of a long consolidation period, WISA hit resistance at the 200 day MA.

Looking at the daily chart below…it didn’t hold the move that day, but previous resistance became the new support…with the stock staying above the mid 2’s from there on out.

WISA then retook the 200 day MA to end the year with another rally to break the previous highs.

This time finding support at the 200 day MA on pullbacks… breaking below in May but technically holding the level…

This brings us to the current situation…

 

What’s happening now?

After the May 12 corporate earnings report, WISA again blasted to new highs with a peak of 5.63 before pulling back where it found support at the 200 day MA this past Monday.

With news of the new Amazon Storefront out today, the stock blasted off to a high of $7.06 this morning.

But with WISA currently trading in the mid 5’s, below the high of the corporate earnings run, the volatile nature of the low float keeps me in check as I look to exercise patience.

I had to look back a year and a half to find the next resistance levels…

Looking at the chart below, there’s a lot of congestion in the 7 – 9 range. This was back when the company implemented a reverse merger to artificially inflate the price…and you can see how well that worked out.

WISA hit 7.06 this morning but wasn’t able to make a run at 9, as the stock has since pulled back to the mid 5’s.

 

What’s Next for WISA?

With the volatile nature of a low float news move, I’m watching the intraday charts closely here…

WISA gapped up in the premarket, and then ran quickly on the open to a hit resistance at 7.06 where it topped out and pulled back.

Currently trading below the VWAP line (pink line), I am watching a few things here…

First off, I am watching the 4.80 – 5 level to see if it can hold the gap up. I don’t want to buy into the current weakness, so I need to see the stock find support first.

I am also watching to see if WISA can get back above the VWAPas that’s a signal of intraday strength to me.

And lastly I will be watching the trading volume…being midday, it’s trailed off quite a bit on the move down, I want to buy into strength so I would need to see increased buying pressure.

To sum it up…

I won’t be interested in this volatile stock unless it can find support and retake the VWAP line with an increase in buying volume.

If this can happen, I may perk up…

If not, WISA has been trading above the 200 day and shown increased buying interest over the past year, therefore the stock will certainly be on my watchlist in the near future…once it does find its next support level.

Author: Jeff Williams

Jeff Williams is a full-time day trader with over 15 years experience. Thousands of entry-level and experienced traders alike – day-traders and swing-trade small cap stock traders – credit Jeff with guiding them to turning small accounts into big accounts.

Jeff’s "Small Account Challenge" shows people how to transform accounts from a few thousand dollars into $25k, $50k or even $100k.

News plays can be explosive…and dangerous of course.

That’s why I don’t trade them on the news alone…I always pair them with chart patterns and technical analysis.

A good example of that came yesterday when NeuroMetrix Inc. (NURO) blasted off on a company press release about one of its products…

Shares of NURO rocketed from 3.26 Monday to close at 10.04 yesterday… up 208% on a record volume of 228 million shares.

Compare that volume to the under 100k shares traded the day before, and it’s a massive difference.

And this morning, NURO continued to catch a squeeze to over 34 at this moment….now up over 900% from Monday’s close.

I’m going to show you how I personally found an end-of-day trade on this rocket ship, as well as how I use chart patterns to find entries in news plays.

Neurometrix Inc. (NURO)

NeuroMetrix (NURO) is a healthcare company that develops wearable neuro-stimulation therapeutic devices and point-of-care neuropathy diagnostic tests to address chronic health conditions, including chronic pain, sleep disorders, and diabetes in a non-invasive fashion.

In a press release yesterday, NURO announced the FDA gave a “Breakthrough Designation” to the company’s Quell device for treating fibromyalgia in adults.

From the press release: “The FDA Breakthrough Device Program is intended to help patients receive more timely access to breakthrough technologies that have the potential to provide more effective treatment or diagnosis for life-threatening or irreversibly debilitating diseases or conditions. Under the program, the FDA will provide NeuroMetrix with priority review and interactive communication regarding device development, through to commercialization. In addition, there are government policies and programs under consideration that, if eventually adopted, may facilitate Medicare reimbursement for FDA Breakthrough Devices following marketing authorization.”

You saw the move on the daily chart above…to see how I found a trade in NURO, take a look at the intraday chart from yesterday.

The press release came out in the morning and the stock was trading in the 4’s when I added it to my midday watchlist.

What I liked was the higher highs and higher lows pattern throughout the day. This is a classic stair step pattern forming on the intraday chart below.

 

I didn’t personally take a trade until the end of the day though…first thing after the close to be exact.

At this point NURO was clearly making higher highs and higher lows, but will it continue…

I watched at the end of the day as the stock pulled back making another higher low at 9.21…looking to take a trade as long as it stays above 8.

I found my opening at 9.72 just a little after the closing bell yesterday, looking for NURO to break above 12 and make another higher high.

It didn’t take long as the stock ripped up to 13.71 and I exited at 13.06 on the way. It was a basic setup that went according to plan.

Could I have seen more of this momentum?

Absolutely…but my trade plan was to buy on a move to a new higher high. And that’s what I did, taking the stock from 9.72 up to 13.06…my trade reached the target, so I got out.

That’s trading. Have a plan and stick to it.

I can’t complain about that outcome…even as I watch NURO continue to rocket this morning.

So what’s the deal with NURO today?

The fact is Quell is a transcutaneous electrical nerve stimulation (TENS) device used to treat pain and already for sale online. And when it comes to TENS devices, there’s a lot of competition out there…

So the idea here is to get further approval from the FDA as a treatment for fibromyalgia and potentially get into government programs which may facilitate Medicare reimbursement. This will open a more specific market and set the product apart.

However, from what I gather at the moment, there are quite a few more steps to go…for instance, this is a note taken from the bottom of their press release:

“Note: The use of Quell for fibromyalgia is investigational and has not been cleared or approved by the U.S. FDA. The safety and effectiveness for this purpose have not been reviewed by the FDA.”

The company stated that moving forward with the designation could position them to potentially launch Quell for the use in fibromyalgia treatment in the second half of the year…so there’s that.

And while the Breakthrough Designation is one step in the right direction, something that’s more important right now is the company’s earnings release which is scheduled for tomorrow morning.

Holding a stock into a corporate earnings report is generally thought of as risky and it’s not something I will generally get caught up in…so that’s another reason for me not to be holding on for dear life.

But I will be paying attention to see how the stock reacts given the huge spike on yesterday’s press release.

The other factor pressing NURO higher is the low float of just over 3 million shares…and with that, the Reddit community has taken up interest in the squeeze pushing it to crazy new heights.

What’s next?

Watch out for corporate earnings tomorrow morning…

Author: Jeff Williams

Jeff Williams is a full-time day trader with over 15 years experience. Thousands of entry-level and experienced traders alike – day-traders and swing-trade small cap stock traders – credit Jeff with guiding them to turning small accounts into big accounts.

Jeff’s "Small Account Challenge" shows people how to transform accounts from a few thousand dollars into $25k, $50k or even $100k.