SINA Corp: This Is the No. 1 Internet Stock of 2017

SINA CorpSINA Stock: This Internet Stock Can Fly

Internet stocks offer investors a chance to participate in a segment of the economy that has been known to experience tremendous levels of growth. SINA Corp (NASDAQ:SINA) stock represents a chance to participate in the lucrative social media landscape that only a mobile platform can capture. This company boasts media segments within the online and mobile platforms. They compete with other Internet stocks like Yahoo! Inc. (NASDAQ:YHOO), which just happened to have its core assets purchased by Verizon Communications Inc. (NYSE:VZ).

With the knowledge that companies are interested in acquiring such assets, an argument can be made that a premium should be placed on similar assets. Comparing the two Internet stocks, Yahoo stock has a market cap of $40.0 billion and SINA stock has a market cap of $5.0 billion. An increase in valuation is certainly a possibility.

In terms of a consumer base, SINA stock has a slight upper hand, as China boasts a gargantuan population base. With a potential consumer base that is much larger than Yahoo’s is, and a market cap that is much smaller, SINA stock has room to appreciate.

The sector and market cap are compelling arguments, but the stock chart is the key factor that has me really excited about this Internet stock. The following chart illustrates the recent major developments in its share price.

SINA Corp NASDAQ Chart

Chart courtesy of StockCharts.com

The dominant trend for this Internet stock since April 2011 was down. This trend is highlighted by the blue downtrend line. The downtrend line is created by connecting the peaks. A downtrend is defined by lower lows, confirmed by lower highs. It can easily be identified as price moves from the upper left to the lower right. There should be no mistaking a downtrend from an uptrend.

August 2016 was a defining moment for SINA stock, as the downtrend was finally broken to the upside. The break was done in dramatic fashion, and the signal that is generated is suggesting a reversal in the trend and an end to the bear market.

The following chart illustrates the pattern that contributed to the breakout.

SINA Corp NASDAQ INDX

Chart courtesy of StockCharts.com

The chart above illustrates the difficulties that SINA stock had with closing above the key resistance level at $54.00 on a monthly basis.

The break of this resistance level coincided with the break of the downtrend line. The combination of two levels of resistance being broken simultaneously resulted in an explosive breakout. SINA stock is up 39% on the month.

To quantify this surge, the following chart illustrates the share price on a one-hour scale.

SINA Corp NASDAQ Index

Chart courtesy of StockCharts.com

The chart above illustrates progressive movement that followed the surge in price. The impulse leg (highlighted in green) is a flagpole. What distinguishes it as a flagpole is the pennant pattern (highlighted in blue) that developed after the impulse wave. Pennants do not exist without a flagpole (impulse wave).

Pennants are significant patterns and traders love them. These patterns frequently appear as midpoint consolidation patterns, and they also act as points against which risk can be assessed. Let me explain in a little bit more depth. If the pattern is indeed a midpoint, the project price target of this pattern is $87.00, and the pattern becomes invalid if the share price falls below $69.00. So, in order to quantify risk, my entry point is set against $69.00 and it will represent the approximate loss that this strategy could produce.

The Bottom Line on SINA Stock

SINA stock had an explosive August; it was up by 39%. These types of returns are not uncommon for Internet stocks, but the price can swing both ways. If I were to play this position, I would use tight stops in order to quantify my risk. The fundamentals are compelling, and I am bullish on this Internet stock. I will continue to hold that bias until the charts give me a reason to change my view.

Internet stocks are a great engine for growth, and many names encompass that sector. If your interest is piqued, I suggest you check out our free report that outlines this exact topic: “Big Tech Stocks Poised for More Growth.” Click HERE for more details.