Chinese Stocks Get Wrecked
July 27, 2021
≈ High IV! Get your High IV!≈
Traders,
China is the largest component of what investors call “emerging markets.” And it’s been getting smashed over the past few months. The selling accelerated on Monday, with the iShares China Large-Cap ETF (FXI) falling over 5%. Volume exploded throughout the session, rising to nearly 55 million shares by the closing bell. This is what widespread liquidation looks like.
If we’re lucky, Monday’s freefall is signaling capitulation is nigh. If we’re unlucky, the sell-fest will continue for a spell before all the weak hands wash out.
From peak to trough, FXI has now fallen 26%. That officially places it in bear market territory. The technicals are garbage, and bears have wrested control of the trend across all time frames. For its part, implied volatility has surged to the 84th percentile, signaling premiums are pumped, and the children are running scared.
While directional traders are taking a hard pass on FXI, I suspect volatility sellers are starting to stalk the ETF. They flock to high IV readings like moths to a flame.
#TeamTackle
Chart of the Day
China Crashes
FXI just roundtripped to where it was a year ago. So much for the post-Covid recovery. It just went up in a wisp of smoke. Are we going to get a chance to buy FXI at its March 2020 lows again? Time will tell.
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