China A50 holds 12400 with conviction. Bullish breakout pending?

CityIndex Broker Updated   
The China A50 trades within a bearish channel on the daily chart, although we strongly suspect it wants to break out of it to the upside.

If you look at the steady stream of weak data coming out of China over the past few months, why is the China A50 not breaking to new lows? In fact, each time the market has pulled back to the 12,400 area since early June buyers have stepped in. And they returned in force yesterday to produce a strong bullish engulfing candle at support.

Bulls could either wait for a break of the 12,857 high to confirm breakout. But if confident that some sort of ‘plunge protection team’ is defending the 12,400 level, any pullback towards it may prove to be a gift for bulls who are anticipating a countertrend breakout.
The rally is on, thanks to reports of incoming stimulus from China. Whether that is enough to actually revive growth remains to be seen (and in all likelihood, it won't) but the main point is that markets are 'buying it'.

We expect the market to fid resistance around the 13,000 - 13,090 region and potentially pullback (if not consolidate). but any _low volatility_ retracement towards Monday's low could help increase reward to risk potential for bulls for another long entry and potential move to 13,500.


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