We believe that the slowdown in Asian markets will likely continue in the future, given that the tariffs on $200 billion in Chinese imports are set into effect this week and that the mid-terms in the US are coming. Nevertheless, we believe that some Asian markets offer opportunities for long positions, although at some geopolitical and economic risk.
EWT.US (MSCI Taiwan ETF)
The Taiwan ETF has formed an inverse head and shoulders. We will track the ETF for a break out above 38 for initiating long positions.
S/L: 37,5
A similar picture is seen in the stock of Taiwan Semiconductor (TSM.US), which can be approached with a similar strategy.
TSM.US (Taiwan Semiconductor)
The current price is situated near several support levels, which makes long positions especially attractive, especially after a break out of an inverse H&S formation.
S/L: 39.83
Given the economic risks to Taiwan, we believe that they can be at least partially hedged by short positions on EM bonds denominated in USD. The iShares JPM USD EM Bond ETF offers such exposure.
The H&S formation, if completed with a breakout to the downside, offers an attractive signal for a short position in the direction of the trend.
Image: pixabay.com
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