History Says to Sell This Chinese Stock Right Now

The shares have shed roughly 35% in the fourth quarter

The shares of Guangzhou-based broadcasting name HUYA Inc (NYSE:HUYA) hit a record low of $14.44 on Dec. 7, after the arrest of a top Huawei exec sparked a sell-off in Chinese stocks. A short-lived bounce was quickly contained by the equity's descending 40-day moving average, and previous such signals have marked good selling opportunities on the stock.

Per data from Schaeffer's Senior Quantitative Analyst Rocky White, there have been two other times HUYA stock has come within one standard deviation of its 40-day trendline after trading below it for 60% of the time in the past two months, and closing below it in eight of the last 10 sessions. These previous signals have resulted in a negative one-month return of 24.33%.

Looking closer at the charts, HUYA stock began trading on the New York Stock Exchange (NYSE) on May 11 at $15.50. The shares climbed as high as $50.82 on June 15, but have trended steadily lower since tagging that notable milestone, and are currently pacing for a fourth-quarter loss of 35.5%. Today, Huya shares are down 2.8% at $15.14.

Options traders have been bracing for more losses, per the stock's top-heavy 10-day put/call volume ratio of 1.16 at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). The weekly 12/28 16.50-strike put has seen one of the biggest increases in open interest over this two-week time frame, and data points to buy-to-open activity here.