We want to ALERT our readers to the fact that the Shanghai Index is hovering around its 52 week low. For aggressive traders we recommend shorting FXI (an ETF) and BIDU at current levels ($142.00 and $282.00 respectively as of 4/2/08).
We will not be buying any Chinese equities at present. Since China does not allow short selling, we urge you to monitor this market over the next several days and bear in mind, the Beijing Olympics loom. For all new Psychology of the Call readers unaware of the Eleven Commandments of Trading, we want to remind you that it's VERY important to put in place the mechanisms that will prevent anything other than minimal loss of capital. Our failure target on FXI is $158.00 and $304 on BIDU, so MAKE SURE to use "buy stop orders" in both cases that would limit the loss in FXI at 11%, and 8% in BIDU. (Commandment #3 requires you to cut losses at a 15% maximum, but our analysis of underlying factors suggests 11% and 8% for FXI and BIDU respectively).