China Stock Could Benefit from Seasonal Tailwinds

PDD pulled back to a historically bullish trendline

Aug 2, 2024 at 11:31 AM

Subscribers to Schaeffer's Weekend Trader options recommendation service received this PDD commentary on Sunday night, along with a detailed options trade recommendation -- including complete entry and exit parameters. Learn more about why Weekend Trader is one of our most popular options trading services.

PDD Holdings Inc - ADR (NASDAQ:PDD) stock is seeing support from bullish quantified data as well as seasonal tailwinds, per Schaeffer’s Senior Quantitative Analyst Rocky White.

The security pulled back to its long-term 200-day moving average, and the past three times this occurred, the stock was higher one month later with an average 8.79% rise. Plus, PDD has seen positive returns in August 67% of the time since the stock’s inception, averaging a 15.8% return.

There is trading at the last large put strike, 130, which could be supportive moving forward. The shares are also seeing a 61.8% Fibonacci retracement from their April lows to May highs.

It's also worth noting options are affordable, per the equity's Schaeffer's Volatility Index (SVI) of 35% which sits in the 15th percentile of its 12-month range. In simpler terms, option players are pricing in low volatility expectations at the moment.

Our recommended September call has a leverage ratio of 6.6 and will double on a 15% rise in the underlying security.

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