Shanghai Composite (CN): Strong buy

The basing pattern of the past weeks has panned out well. The strong rally of today confirms the bullish undertone and rapid improvement of the near-term outlook. A retest of the trend line and cloud resistance, roughly coinciding at 2808 is the least to expect. A breakout above this zone generates a strong near-term buy targeting 3038 and the less important hurdle at 3128 thereafter.

Whether current developments will also improve the longer term outlook remains to be seen. For now, we consider the index a strong trading buy with stops below 2675.

  • Near term trend: positive
  • Primary trend: neutral
  • Outlook: strong recovery
  • Strategy: trading-buy
  • Support: 2675 / 2640-
  • Resistance: 2808 / 3038 / 3128*
  • Outlook cancelled/neutralized below 2675

Weekly Chart Shanghai Composite Index (China)

23 August 2018 – Basing above support

Although it is still too early to become bullish, the recent developments on the Shanghai Composite do suggest the worst is over. The major pivots around 2675 have managed to hold out and bullish divergence is setting in. This combination suggests more cooling, stabilisation and recovery attempts can be expected over the coming days and weeks.

Again, more is needed before buying can be done. Prices need to clear 2820 (absolute minimum) and preferably rally towards the top of the cloud resistance around 2885<> 2910 before we have enough signals of a probable new uptrend.

For now, exit short and stand aside. Closing below 2675 (convincingly) cancels out the expected scenario.

  • Near term trend: neutral
  • Primary trend: neutral/slightly negative
  • Outlook: basing, recovery
  • Strategy: exit-short, monitor developments
  • Support: 2675 / 2400-
  • Resistance: 2820 / 2885 / 2910 / 2955+
  • Outlook cancelled/neutralized below 2675

Weekly Chart Shanghai Composite Index (China)