Summary:
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The Chinese stock market index keeps trading above the 61.8% Fibo level of the bull market started at the beginning of 2016
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11150 pts handle seen as the crucial resistance level
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CHNComp still moves within a short-term upward price channel
Investors from China came back from the Lunar New Year holiday. The week ahead may be especially interesting for the Chinese stock market as the fresh round of trade talks will be held in Beijing. HSCEI (CHNComp) keeps trading above the 61.8% retracement level of the upward impulse started at the beginning of 2016. This technical hurdle was tested twice recently and in both cases it managed to fend off the bears. On the other hand, the 11150 pts handle can be seen as the nearest, key resistance level as local highs from 2018 and two moving averages (50- and 100-week) can be found there.
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Source: xStation5
Moving onto a daily chart one can also see the importance of the 11150 pts area. After a week-long holiday investors from China managed to push the index higher and it happened even despite lacklustre outcome of the last week’s trade talks. In the very same area one can also find a downward sloping trendline. Breaking above it should not come with ease but in case bulls manage to do it then the way towards the 12000 pts area would be open. From the fundamental point of view, such a rally could be sparked by signing of the US-China trade deal. Apart from that, price pulled back towards the 200-session moving average therefore the latest weakness can be treated as corrective pullback towards the recently broken resistance level (moving average).
Source: xStation5
On the other hand, the intraday chart shows first signs of bulls’ weakness. The index still trades within the upward price channel but the latest pullback (green rectangle on the chart below) was bigger than earlier ones (red rectangles) in the current uptrend. This may be the early sign of the looming bigger correction. Confirmation of such scenario materializing would be a break below the 50-session moving averages channel.
Source: xStation5
