ftse china a50 weekly outlook 09 nov to 13 nov risk of a multi week pullbackconsolidation below key

(Click to enlarge charts)

What happened last week

The China A50 Index (proxy for the FTSE China A50) has manage to stage a remarkable rally from the 10100/9790 support zone as expected. In today’s morning session (09 November), the Index printed a high of 11139 as at 12.43pm (SGT) which is closed to the lower limit of the expected target at 11480 ( a difference of 3.06%)

Please click on this link for a review on our prior weekly outlook/strategy.

Key Economic Data Release/Events

• 10 Nov (Tues) – China Consumer & Producer Price Indices for Oct @0130 GMT
• 11 Nov (Wed) – China Fixed Asset Investment, Industrial Production & Retail Sales for Oct @5.30 GMT

Key elements

• Current price action of the Index continues to evolve within a medium-term bullish ascending channel (in orange) in place since the “Black Monday”, 24 August 2015 low. It is now coming close to the upper limit (resistance) of the ascending channel at 11480 (see 4 hour chart).
• The ascending channel’s resistance also confluences closely with the 11970 level which is defined by a Fibonacci cluster (50% Fibonacci retracement of the summer sell-down from 09 June 2015 high to 24 August 2015 low + 1.618 Fibonacci projection from 24 August 2015 low to 08 September 2015 high @8pm projected from 29 September 2015 low @8am) and the 200-day Moving Average (see daily chart).
• The 11480/11970 will be a significant resistance zone as per aforementioned.
• The daily (medium-term) RSI oscillator that gauges price momentum is coming close to its extreme overbought level which suggests that the current upside momentum is getting “overstretched” and the Index may see a pull-back in price action soon (see daily chart).
• The support to watch now will be at 10530 follow by 10160 which is the lower limit of the bullish ascending channel (see 4 hour chart).

Key levels (1 to 3 weeks)

Intermediate resistance: 11480

Pivot (key resistance): 11970

Support: 10530 & 10160

Next resistance: 12940

Conclusion

The Index is now approaching its risk zone at 11480/11970 and it is likely see a final push up below the 11970 weekly (medium-term) pivotal resistance before a potential multi-week pull-back/consolidation occurs for a drop towards 10530 before the 10160 support.

On the flipside, a clearance above the 11970 pivotal resistance may invalidate the multi-week pull-back/consolidation scenario for a further squeeze up to target the next resistance at 12940 (swing high of 10 July 2015).

Disclaimer

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