China Shenhua Energy: Another Upleg Expected

Chart showing uptrend
China Shenhua Energy (1088), a major Chinese coal miner, announced that commercial coal production dropped 7.1% on year to 22.2 million tons in April while sales were up 68.4% to 31.5 million tons. Also, gross power generation slid 9.7% to 9.97 billion kwh and total power output dispatch declined 9.9% to 9.32 billion kwh.

From a technical point of view, the stock retreated from the March high at HK$15.10 before posting a rebounding at HK$13.00, which is the level around the 61.8% retracement level. Currently, the prices broke above the declining trend line drawn from March top. It indicates that the corrective move from March top would be ended.

The RSI also posted a bullish divergence signal when the stock made a bottom at HK$11.96. The bullish divergence signal could suggest that the important bottom could be made as the bearish side is losing the momentum. Then, the RSI has broken the declining trend line drawn from March, suggesting that the momentum is turning upward.

In this case, bullish readers could consider to set the support level at HK$13.00 (the previous low) and the resistance levels at HK$15.10 (March high and the 61.8% retracement level between January top and March low) and HK$15.82 (78.6% retracement).

In an alternative Scenario, a break below HK$13.00 would call for a return to the March low at HK$11.96.


Source: GAIN Capital, TradingView
Related tags: Equities China

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