Is now the time for the China A50 to break higher?
Joe Perry April 30, 2021 3:25 AM
Price could break higher above the trendline channel for any number of reasons
One of our most popular Indices to trade in China, the China A50, had been trying to pull back through support below 16,440. But thus far, has failed to do so. Does that mean it will move higher from here? After putting in pandemic lows near 11,495 on March 19, 2020, China’s main index moved aggressively over the next 11 months to a high of 20,603 on February 18th. With a diverging RSI, the China A50 pulled back to the 38.2% Fibonacci retracement level from the same timeframe to near 17,140 on March 21st and has been oscillating around that level since.
Source: Tradingview, City Index
However, over the course of the last month, the index has been moving in a slight downward sloping channel and has put in 3 lower lows while the RSI has put in 3 higher lows. The 200 Day Moving Average, which is currently 16,847, is creeping higher as price brushes against the top trendline of the channel. Between April 13th and April 19th, the China A50 traded below the 200 Day Moving Average several times, however failed to close below it each time! It also held horizontal support from early July 2020 near that some level. Is now the time for the index to break above the downward sloping trendline and move back towards the February highs?
Over the course of the next week, China will release Manufacturing and Services PMIs, Trade Balance, CPI and PPI. All economic data is forecasted to be better than March’s data. If it comes out better than expected, bulls may be looking to push the China A50 above the channel trendline, which is at Thursday’s highs of 17,528.5.
On a 240-minute timeframe, the move higher off the bottom trendline on April 15th has created a nice short-term channel of its own. The next resistance level is at the top trendline of the shorter-term channel, which confluences with horizontal resistance near 17,791. Above there is the psychological round number resistance at 18,000, and then the 38.2% Fibonacci retracement level from the February 18th highs to the April 15th lows near 18,604. The first level of support is at the bottom trendline near 17,200. Next support is the psychological round number level and horizontal support near 17,000. If price breaks lower, the 200 Day Moving Average is at 16,847.
Source: Tradingview, City Index
Price could break higher above the trendline channel for any number of reasons, including the economic data to be released over the next week. If it does, price may move aggressively higher. However, if price fails and moves lower, there are several near-term support levels where bulls could be waiting to bring the China A50 higher.
This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.
StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.
In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.
StoneX Financial Pte. Ltd. is not under any obligation to update this report.
Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit cityindex.com.sg for the complete Risk Disclosure Statement.