ftse china a50 weekly outlook for 25 may to 29 may risk of a pull back holding above 1404013700 supp

(Click to enlarge charts)

What happened last week

The China A50 Index (proxy for the FTSE/Xinhua China A50) has pushed higher and broke above 13480 pre-defined upside trigger level as expected. Earlier this morning (25 May 2015), the Index has staged a rally and it is coming close to our expected upside target at 14550 as defined last week.

Please click on this link to review our previous weekly outlook.

Key elements

• The Index has continued to push higher above its 20-day Moving Average (in red) which is now acting as a support at 13700 (see daily chart)
• The 13700 support also confluences with the 50% Fibonacci retracement of the current up move from 18 May 2015 low to the current 25 May 2015 high (see 4 hour chart).
• The intermediate term RSI oscillator remains bullish above its support and 50% neutrality level. It still has room for further upside (as depicted by the light blue box) before reaching its extreme overbought level (see daily chart).
• The upper boundary (resistance) of the medium term ascending channel (in orange) in place since 20 November 2014 low stands at 15860 which also confluences with the 1.00 Fibonacci projection from 20 March 2014 low to 05 March 2015 low (see daily chart).
• The short-term Stochastic oscillator has reached its extreme overbought level which suggests that a pull-back in price action of the Index is imminent (see 4 hour chart).

Key levels (1 to 3 weeks)

Intermediate support: 14040

Pivot (key support): 13700

Resistance: 14550 & 15680/15860

Next support: 12860 & 11810

Conclusion

The medium term bullish trend in place since 09 March 2015 low remains intact. However, current technical elements suggest that the Index is likely to see a pull-back first towards the intermediate support at 14040 with a maximum limit set at the 13700 weekly pivotal support before a final push up towards the significant resistance of 15680/15860.

However, a break below 13700 may negate the bullish tone for a slide towards to retest the 12860 support which is also the lower boundary of the medium term ascending channel (in orange as depicted in the daily chart) and 50-day Moving Average (in blue). Only a clear break below 12860 is likely to damage the medium term bullish trend for a deeper decline to target the next support at 11810.

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