Opinion: How to trade stocks as Trump threatens China with new tariffs


One question for investors today is how they want to react to President Trump’s threat to impose more tariffs on Chinese products.

Let’s explore the problem using a graph.

Graphic

Please click here for an annotated chart of the S&P 500 ETF SPY ETF,
-0.41%,
which represents the S&P 500 SPX index,
-0.42%.
Please note the following:

• The Chinese are notorious for dragging out negotiations to get the best deal. Regardless of your political leanings, Trump’s latest move appears to be in the best long-term interest of the United States and the stock market.

• The short term for the stock market is another story.

• The graph shows five areas of support. These support areas are based on a number of factors that have been proven to be correct in the past including the way algorithms tend to trade as well as the flow of money.

• The chart shows the target area of ​​a potentially explosive rally on a short squeeze. If it turns out that there is a good trading deal soon, those who are short selling now will be forced to hedge at much higher prices.

• Expect stocks dependent on China to be affected more. These include Apple AAPL,
-2.76%,
Starbucks SBUX,
-0.64%,
Nike NKE,
+ 0.31%
and Yum China YUMC,
+ 1.55%.
Expect less impact on Google GOOG,
-1.32%

GOOGL,
-1.02%,
Amazon AMZN,
-2.27%
and Facebook FB,
-1.41%.
Microsoft MSFT,
-2.37%
and semiconductor stocks such as Intel INTC,
+ 0.37%,
AMD AMD,
-5.52%
and Micron Technology MU,
-3.11%
may be adversely affected.

• Expect Chinese stocks such as Alibaba BABA,
-2.66%
and JD.com JD,
-1.18%
be negatively affected.

• Expect day traders to make money trading Chinese YINN leveraged ETFs,
+ 1.18%
and YANG,
-1.30%.

Read:Goldman Sachs Says Trump Tariff Threat “Increases Chances Of Further Tariff Escalation”

Ask Arora: Nigam Arora answers your questions about investing in stocks, ETFs, bonds, gold and silver, oil and currencies. Have a question? Send it to Nigam Arora.

Whip saws

The best thing investors can do is guard against whipsaws. Expect plenty of whipsaws based on rumors, tweets, and new reports.

What to do now

At The Arora Report, we offer specific levels of liquidity and hedging, as well as stocks and ETFs to hold. Last week in our low risk ZYX wallet, Internet ETF FDN,
-2.36%
was sold because it was overbought. Our portfolios today were well protected with cash and hedges. These levels are determined based on the ZYX asset allocation model with 10 entries. This morning, we further increased liquidity levels and hedges. We continue to hold good long-term positions and plan to add more opportunistically as new positions enter our buy zones. We also plan to take advantage of short-term opportunities as they arise.

Disclosure: subscribers to The Arora Report may hold positions in the securities mentioned in this article or take positions at any time. Nigam Arora is an investor, engineer and nuclear physicist by training who founded two of the fastest growing Inc. 500 companies. He is the founder of The Arora Report, which publishes four newsletters. Nigam can be contacted at [email protected]


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