China A50 at risk of shaping a medium-term bearish reversal

Best performing Asia Ex Japan stock index, China A50 is showing signs of bullish exhuastion.

2019 year to performance of Asia ex Japan stock markets till 15 Nov

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Medium-term technical outlook on FTSE China A50

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Key Levels (1 to 3 weeks)

Intermediate resistance: 13560

Pivot (key resistance): 14465

Supports: 13560 (trigger), 12860 & 12460

Next resistance: 15700/16770

Directional Bias (1 to 3 weeks)

Bearish bias below 14465 key medium-term pivotal resistance a break below 13560 reinforces a further a potential multi-week corrective decline to target the next supports at 12860 and 12460 within a long-term secular ascending range configuration in place since Oct 2008 low.

On the other hand, a clearance with a daily close above 14465 sees a continuation of major uptrend in place since Dec 2018 to set sight on the secular ascending range resistance at 15700/167700.

Key elements

  • The recent 5-month up move of 16% from its 24 May 2019 low has started to stall right below the descending resistance from Jun 2015 major swing high (see weekly chart).
  • Price action has also formed an impending weekly “Evening Star” candlestick pattern that tends to indicate a potential bearish reversal in price action after an uptrending phase.
  • The weekly RSI oscillator has also shaped a bearish divergence signal since Jul 2019 which indicates the upside momentum has started to wane which increases the risk of a medium-term bearish reversal in price action of the Index.
  • The daily RSI oscillator has staged a breakdown from its ascending support which is in parallel with the price action ascending support from 27 May 2019 low. These observations suggest a potential presignal breakdown below the ascending support of 13560.
  • The next significant medium-term support rests at 12460 which is defined by the congestion range lows of 25 Mar/23 May 2019 and close to the 50% Fibonacci retracement of the major up move from 04 Jan low to 05 Nov 2019 high.  

Charts are from eSignal 

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