Chinese automaker LI Auto looks to be forming a high-tight flag pattern. It somewhat reminds me of NIO in 2020, which was a monster stock during that market cycle. Like NIO, LI is also a Chinese automanufacturer selling electric cars. LI, however, has much more impressive earnings and sales, producing extremely high sales growth over its' last six quarters and two quarters of strong earnings growth. While I am somewhat skeptical of Chinese stocks with these type of fundamentals (think Luckin Coffee), I have successfully traded stocks like NIO, FUTU, and BABA in the past. The key for me is to use a chart to get a sense of what is really going one. And when we pull up LI's chart, it does indeed look like something good is going on.
LI doubled in seven weeks, and has recently been consolidating in a very orderly manner. The big volume coming in is not your "Aunt Suzzy" buying, as William O'Neil would say. It's a fund or institution coming in to purchase shares. In addition, I've been noticing strong action among many Chinese stocks recently, with JKS and PDD sporting really impressive moves over the last few weeks. I'll be monitoring LI for a buy point in the coming trading sessions.
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