Chinese stocks – finding support?

By Prieur du Plessis, on May 22nd, 2011 posted in: China, Stocks One comment so far

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The Chinese Shanghai Composite Index has come under pressure over the past month, with a 7.0% decline since its April high compared with declines of 6.1% for emerging markets in general and 4.4% for developed markets. However, it seems that the Index might be finding support around the 2,850 level as it also marked the February low and is close to the primary 200-day moving average.

Source: StockCharts.com

Although no buy signals have been given yet, the momentum oscillators (MACD and ROC) in the bottom two panes of the chart above are on the verge of breaking through the zero line which should spell upside potential for Chinese stocks.

Also, Arthur Hill of StockCharts.com highlights that despite relative weakness versus the S&P 500 Index (bottom section of chart below), the Shanghai Composite Index is trying to firm in a support zone that centers around the 62% Fibonacci retracement level (yellow band in top section of chart). It is premature to jump to conclusions, but a break above 2,900 could be the first sign of better tidings ahead. As Chinese stocks often lead global stock markets at important turning points, I will keenly watch developments on this front.

Source: Arthur Hill, StockCharts.com

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