Potential For A Corrective Bounce In China Stocks Before Prices Turn Low
Mike Macdonald | Aug 27, 2015 02:29AM ET
The break below the July trendline in the Shanghai Composite Index (SSEC) has resulted in a swift fall, with prices currently finding support at 2850. Whilst there is risk, in the coming days, of further losses towards strong support at the 2730, (76.4%) retracement of the 2014-2015 rally, this latter level should underpin any tests, as oversold daily studies are beginning to show signs of correcting higher.
Any subsequent rally should be treated with caution, however, as sentiment from both a Chinese and Global perspective remains very bearish, with the main driver likely to be short-covering and risk reduction, rather than an explicit change in bearish investor sentiment.
Resistance is at the 3191.88 gap high from 24 August, but further resistance at the 3537.36 low of July is expected to prove more difficult to clear, and could promote consolidation.
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