TRADER: Amazon and Chinese tech stocks are 'about to rip'

JC Parets, CMT, Founder & Chief Strategist at allstarcharts.com, joins Yahoo finance's Jared Blikre to chart the breakout in Amazon as well as Chinese internet stocks.

Video Transcript

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AKIKO FUJITA: The DOW trading pretty flat right now in the afternoon session with the NASDAQ seeing the steepest losses. Amazon certainly in focus with other cloud services pulling those services from conservative platform Parler, Jared Blikre tracking that along with some other stocks for us. Jared.

JARED BLIKRE: That's right. And I want to bring in JC Parets, founder of All Star Charts. JC, I want to start with Amazon. It's kind of a hot ticker today. And we have a longer term chart going all the way back about one year from your slide deck here. Why don't you just take us through what you're seeing?

JC PARETS: Yeah. Well, I mean listen. Consumer discretionary is outperforming consumer staples which is consistent with a stock market environment where you're being rewarded for owning stocks versus shorting them. Right? If consumer staples, sort of the things that we need, beer, cigarettes, laundry, toothpaste, all those things-- I don't really drink beer or smoke cigarettes. My wife loves doing laundry. So I'm 0 for 3 of those.

But staples in general versus consumer discretionary where we spend money on things we don't need, essentially, is the-- right? So automobiles, retailers, home builders, things like that. Amazon is the biggest and the baddest. They keep changing it on me. I don't know. It represents like, I don't know, 20 something percent of the entire consumer discretionary sector.

So I do the reverse engineering, right? So the stock market's going to go up, S&P 500 to 4,500 which is where I think we're going, consumer discretionary in my opinion needs to be one of those leadership groups particularly relative to staples. And if discretionaries are going to go up and they're going to lead, Amazon can be making new lows, right? That's just math. So we're reverse engineering this trade. It's in an uptrend. Those are the types of stocks we like to own. If Amazon is above 3,000, I think it needs to be owned. It needs to be part of a portfolio.

I think not doing that almost makes you short. By not having that exposure, you're essentially shorting Amazon because you're losing that alpha. Man, Jared, I think it's got 60% of upside.

JARED BLIKRE: Well, I don't want to be short Amazon right now for sure. But I want to check out the Shanghai Composite. Because we're looking at a 20 year chart. And I know you've annotated this as well. It's breaking to the upside. And how do you play this in the US?

JC PARETS: Yeah. Shouldn't be surprising. Most country indexes are doing just that, breaking to the upside. And Shanghai is no different. Listen, at the beginning of the fourth quarter of 2018 right before the stock market really sold off, Shanghai was breaking down to new lows. So we're not in that environment. It's the opposite. And Shanghai's breaking out Chinese internet, Chinese technology, and when Shanghai goes, when Chinese stocks go, they really go.

As you can see in the chart, when we've broken out in the past coming out of these bases ending those downtrends, Chinese stocks really go. So that's a space we like. And it makes sense globally, right? Consumer discretionaries, technology, communications, those three sectors alone represent half of the entire emerging markets index. China represents like 42%, 41%, something like that. So this is EM, baby. All day long.

JARED BLIKRE: Yep. All right, JC. Before we go, I just want to let everybody know that you and I have a webinar right here at Yahoo Finance this Wednesday a roadmap to trading profitably and consistently in 2021. Check out my Twitter feed for that pinned link to register. It's @SPYJared. And we are sending it back off to you, Akiko.

AKIKO FUJITA: Nice plug there. Great to-- well, certainly looking forward to that discussion and our thanks to JC as well.