Profit From The U.S.-China Trade Truce With This JD.com Trade

JD may push toward its 2018 highs

This morning, I am recommending a bullish trade on JD.com, Inc. (NASDAQ:JD).

Earlier this week, I recommended a bearish play on Micron Technology, Inc. (NASDAQ:MU). The market was up from the positive trade news, and I thought a downside trade on a semiconductor stock would be good protection in the event of a pullback.

But my indicators are giving bullish readings this week — a solid upgrade from last week’s neutral readings — as the S&P 500 continues to set new all-time highs. It is the start of a new month and a new quarter, and it’s time to take advantage of all the recent bullishness with a bullish call option.

If the Market is Bullish After the Trade Truce…

The index closed at 2,995.82 at the end of Wednesday’s abbreviated session to set a new record, and the S&P futures even crossed the 3,000 level briefly. A lot of traders are also out on vacation around this time, so the relatively low trading volume on Wednesday probably helped the bulls clear resistance as well.

SPX Chart

Daily Chart of the S&P 500 Index (SPX) — Chart Source: TradingView

But the main reason for the rally this week is that President Trump and Chinese President Xi were able to come to an agreement to refrain from imposing new tariffs and proceed with further negotiations.

As I mentioned earlier this week, that doesn’t mean the trade war is over. But if the rest of the market is bullish after this news, having some bullish exposure to Chinese stocks makes sense. If we look at JD’s technical picture, now may be the perfect opportunity to get in.

JD is at a Turning Point

Looking at the daily chart for JD, we can see it is starting to break above resistance at $31.50. It has been rising since hitting a bottom at the end of 2018, but it started to struggle in late May and early June — right about the time the trade situation was becoming more tense.

JD Chart

Daily Chart of JD.com (JD) — Chart Source: TradingView

Now that tensions are easing and the market is becoming more bullish, traders have a chance to push JD toward its highs from 2018.

While I don’t expect that much bullishness, we might see JD challenge the $34 level, which briefly acted as resistance when JD was falling in 2018. That makes $33 a good strike price for a bullish call option.

Buy to open the JD.com, Inc. (JD) Sep. 20th $33 Calls (JD190920C00033000) at $1.55 or lower.

Note: This article was originally published on July 5, 2019. InvestorPlace advisor Ken Trester brings you Power Options Weekly, which delivers 5 new options trades and his latest trading advice to you each Friday. Trester has been trading options since the first exchanges opened in 1973 with a winning streak that goes back to 1984 with money-doubling average annual profits since 1990.

 

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