A Technical Buy

by Paul Goodwin on January 22, 2015

This is an excerpt from Cabot China & Emerging Markets Report, which seeks to capitalize on the big boom in China and other emerging market countries. Editor Paul Goodwin, Cabot’s international investing guru, provides your passport to profits.

The Cabot Emerging Markets Timer has moved into a technical buy position, so we’re watching closely for opportunities to increase our exposure. But the signal isn’t a signal to rush back into emerging market equities.In the portfolio today we are putting one stock back on buy.

The PowerShares Golden Dragon Halter USX China ETF (PGJ) corrected steeply from November 25 to December 16, but bounced quickly into a gradual uptrend that has been crawling higher ever since. The Golden Dragon’s recovery from 27 to 28.7 has now pushed it back above its 25-day moving average, giving us a new buy signal. Technically, it doesn’t matter that the 25-day moving average is well below the 50-day, and that both are below the 200-day. That kind of inversion happens easily when an ETF like the Golden Dragon has been trading in a range for an extended period of time.

So we will honor our new buy signal, but we certainly won’t jump in with both feet. Our method will be to let our stocks pull us back in gradually. When our holdings and the candidates on our watch list make progress, we will increase our exposure. But not before.

We’re also keeping a wary eye on the new earnings season that’s just beginning. In a global atmosphere with many uncertainties and a plenitude of threats, investors are likely to take the messages from Q4 and 2014 earnings very seriously. And we will watch very closely.

A researcher and writer for over 30 years, Paul Goodwin has been a member of the Cabot investment team and chief analyst of Cabot China & Emerging Markets Report since 2005.

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