A50 Index (Short term): Focus on the Declining Trend Line
The A50 Index has rebounded around 13% from the March on the hope of economic recovery after the COVID-19 outbreak.
Last week, China's CPI grew 3.3% on year in April, worse than the expectation of the increase of 3.7%, compared with the growth of4.3% in March, according to the government. In the below chart, the growth of CPI is slower since February, but has not reversed up.
![](/en-au/-/media/research/global/2020/05/0520china-cpi.jpg?h=513&&w=1000&hash=6DD4E5E9023E8208B8B2AFC7308B87CE)
Source: Trading Economic
On the other hand, China's industrial production rose 3.9% on year in April, better than the expectation of an increase of +1.5%. In the below chart, the industrial production data has reversed up since March and returned to the positive in recent data. It indicates that the industrial activities are recovering in China.
![](/en-au/-/media/research/global/2020/05/0520china-industrial-production.jpg?h=493&&w=1000&hash=A9AA89D3BD9D7366269B07E19BF1CEE2)
Source: Trading Economic
On a daily chart, the index prices remain capped by a declining trend line drawn from January top, indicating a bearish outlook. However, the index stays above both rising 20-day and 50-days moving averages, which suggests a positive bias. As the technical views are mixed, it is better to stay at neutral bias.
On the upside, only a break above 13720 (the high of May 11) would validate a bullish breakout of declining trend line and call for a rise to the resistance level at 14250 (the high of March).
On the downside, a break below the previous low at 12800 would violate the higher tops and higher bottoms pattern and bring a return to 12390 (the low of April).
![](/en-au/-/media/research/global/2020/05/052020a50ci.png?h=553&&w=1000&hash=44109CE50A344B09EBCEF8832301A5E4)
Source: GainCapital, TradingView
Last week, China's CPI grew 3.3% on year in April, worse than the expectation of the increase of 3.7%, compared with the growth of4.3% in March, according to the government. In the below chart, the growth of CPI is slower since February, but has not reversed up.
![](/en-au/-/media/research/global/2020/05/0520china-cpi.jpg?h=513&&w=1000&hash=6DD4E5E9023E8208B8B2AFC7308B87CE)
Source: Trading Economic
On the other hand, China's industrial production rose 3.9% on year in April, better than the expectation of an increase of +1.5%. In the below chart, the industrial production data has reversed up since March and returned to the positive in recent data. It indicates that the industrial activities are recovering in China.
![](/en-au/-/media/research/global/2020/05/0520china-industrial-production.jpg?h=493&&w=1000&hash=A9AA89D3BD9D7366269B07E19BF1CEE2)
Source: Trading Economic
On a daily chart, the index prices remain capped by a declining trend line drawn from January top, indicating a bearish outlook. However, the index stays above both rising 20-day and 50-days moving averages, which suggests a positive bias. As the technical views are mixed, it is better to stay at neutral bias.
On the upside, only a break above 13720 (the high of May 11) would validate a bullish breakout of declining trend line and call for a rise to the resistance level at 14250 (the high of March).
On the downside, a break below the previous low at 12800 would violate the higher tops and higher bottoms pattern and bring a return to 12390 (the low of April).
![](/en-au/-/media/research/global/2020/05/052020a50ci.png?h=553&&w=1000&hash=44109CE50A344B09EBCEF8832301A5E4)
Source: GainCapital, TradingView
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