China A50 at risk of shaping a medium term bearish reversal

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By :  ,  Financial Analyst

2019 year to performance of Asia ex Japan stock markets till 15 Nov

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Medium-term technical outlook on FTSE China A50

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Key Levels (1 to 3 weeks)

Intermediate resistance: 13560

Pivot (key resistance): 14465

Supports: 13560 (trigger), 12860 & 12460

Next resistance: 15700/16770

Directional Bias (1 to 3 weeks)

Bearish bias below 14465 key medium-term pivotal resistance a break below 13560 reinforces a further a potential multi-week corrective decline to target the next supports at 12860 and 12460 within a long-term secular ascending range configuration in place since Oct 2008 low.

On the other hand, a clearance with a daily close above 14465 sees a continuation of major uptrend in place since Dec 2018 to set sight on the secular ascending range resistance at 15700/167700.

Key elements

  • The recent 5-month up move of 16% from its 24 May 2019 low has started to stall right below the descending resistance from Jun 2015 major swing high (see weekly chart).
  • Price action has also formed an impending weekly “Evening Star” candlestick pattern that tends to indicate a potential bearish reversal in price action after an uptrending phase.
  • The weekly RSI oscillator has also shaped a bearish divergence signal since Jul 2019 which indicates the upside momentum has started to wane which increases the risk of a medium-term bearish reversal in price action of the Index.
  • The daily RSI oscillator has staged a breakdown from its ascending support which is in parallel with the price action ascending support from 27 May 2019 low. These observations suggest a potential presignal breakdown below the ascending support of 13560.
  • The next significant medium-term support rests at 12460 which is defined by the congestion range lows of 25 Mar/23 May 2019 and close to the 50% Fibonacci retracement of the major up move from 04 Jan low to 05 Nov 2019 high.  

Charts are from eSignal 

Related tags: Indices China

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