ftse china a50 weekly outlook 19 oct to 23 oct breaking above the key 10100 level 1627622015

(Click to enlarge charts)

What happened last week

The China A50 Index (proxy for the FTSE China A50) has continued to inch higher from the 29 September 2015 low.

Please click on this link for a review on our previous weekly outlook.

Key elements

• Current price action is now attempting the break above the 10100 significant upside trigger level which is defined by the former support linking the lows on four occasions (19 January, 06 February, 09 March & 08 July 2015) follow by 11480 next (defined by the pull-back resistance, in dark blue & the 50% the steep down move from 09 June 2015 high to 24 August 2015 low) (see daily & 4 hour charts).
•  The daily (medium-term) RSI oscillator remains bullish above its support and the 50% neutrality level. In addition, it still has room for further upside before reaching its extreme overbought level. These observations suggest that upside momentum has continued to build-up (see daily chart).
• The next significant medium-term resistance to watch will be at 11480 which is the former support linking the lows of 08 July, 28 July & 03 August 2015 now turns pull-back resistance (in dark blue), 200-day Moving Average and the 50% Fibonacci retracement from the steep down move from 09 June 2015 high to the “Black Monday”, 24 August 2015 low (see daily & 4 hours).
• In the shorter-term, the Index is being supported by an ascending trendline from “Black Monday”, 24 August 2015 now acting as a support at 9335 which also confluences with a Fibonacci cluster.
• The 4 hour (short-term) Stochastic oscillator is coming close to the extreme overbought level but no sign of a bearish divergence. On the other hand, the 4 hour RSI oscillator is still holding above its support and the 50% neutrality level. These observations suggest that upside momentum remains intact despite the Stochastic oscillator is in the overbought region.

Key levels (1 to 3 weeks)

Pivot (key support): 9335

Resistance: 10100 & 11480

Next support: 8990 & 8400/8000

Conclusion

Technical elements remain positive. The weekly pivotal support to watch will be now at 9335 and a daily close above 10100 is likely to add impetus for a further potential rally to target the next resistance at 11480.

On the flipside, a break below the 9335 pivotal support may negate the bullish tone to see a retest on the 8990 level. Only a clear violation below 8990 is likely to trigger a deeper decline to retest the “Black Monday”, 24 August 2015 low at 8400 and even 8000.

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