China tech stocks are on sale — one key level to watch if you’re considering buying

Regulatory crackdowns have torpedoed the China tech trade.

Alibaba, Baidu, and Pinduoduo, some of the country’s largest tech companies, have collectively lost more than $500 billion in market cap since their February peaks as new anti-monopoly and data security rules in China threaten to weigh on profits.

With Alibaba, Baidu and trading at significant discounts to their historical price-earnings multiples, valuations may look compelling to those willing to shoulder the regulatory risks.

It’s worth being selective in the group, however, MKM Partners’ chief market technician, JC O’Hara, told CNBC’s “Trading Nation” on Thursday.

“When you look at a lot of these charts, they’re in downtrends, and downtrends to me say stay away,” he said.

One name that showed some technical promise was, O’Hara said.

The stock has begun to stabilize after breaking below longtime support at its 100-day moving average, which initially caused a roughly 40% decline, O’Hara said.

“I’m really focused on the $80 level. That is key chart resistance as well as that longer-term 100-day moving average,” he said. “If JD can put in a sustained close above that level, now we would have a stock that’s in an uptrend with attractive valuations. That’s when it becomes a buy for us.” fell by nearly 2% to around $75.50 a share in early Friday trading.

Another trader saw this as a chance to buy some of China’s most important companies on sale.

“I believe this is a big opportunity to own some of the biggest and best Chinese tech names, names like Tencent, Alibaba and Baidu,” Michael Binger, president of Gradient Investments, said in the same “Trading Nation” interview.

“These are secular growth stocks that still have a long runway of growth,” he said.

Though government intervention is not to be ignored, neither are the deep discounts at which these stocks are trading, Binger said.

“China’s economy is big and it’s recovering rapidly,” he said. “If I have a chance at these stock levels to own the biggest search engine, the biggest social networking company and the biggest e-commerce company in that rapidly growing economy in China there, I’m in and I want to invest right here.”

Author: Lizzy Gurdus, CNBC “Fast Money”

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