Chinese Equities Prepare For A Breakout

 | Aug 14, 2016 06:33AM ET

Chinese equities might be on the verge of a strong breakout. This week's price action pushed the SSE (LON:SSE) 50 Index to the horizontal resistance at 2,225 levels. Since the beginning of 2016, SSE 50 has been recording higher lows, a bullish signal. Another week of strong price action can clear the 8 month-long resistance and push the index towards 2,500 levels. Volatility is low both on the daily and weekly charts suggesting a trend period might develop after a decisive breakout.
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There are several bullish chart set-ups in Hong Kong listed securities. I share below some of the clear chart patterns that are likely to resolve on the upside if we see a breakout on the Chinese benchmark equity index.

MGM China Holdings Ltd (MU:M04)

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It has formed a year-long H&S bottom, a bullish reversal chart pattern, with the neckline standing at 12.20 levels. Breakout above 12.20 can push the stock higher to test 17-18 area.