Technicals | Sep 09 2013
Bottom Line 05/09/13
Daily Trend: Up
Weekly Trend: Up
Monthly Trend: Down
Technical Discussion
We continue to forward the notion that a major low has been locked in on the 25th June at 1850 that is unlikely to be revisited. The longer term charts convey the falling wedge pattern that has completed more clearly, with our wave count locking in a higher degree Wave-(B). What this means is that bigger picture, we continue to believe that the Shanghai Composite Index remains in corrective mode only. Yet that doesn't mean the Wave-(C) move higher we are now observing, does not have some decent upside targets attached to it. In fact Wave-(A) vs Wave-(C) equality targets levels close to 3650. With the falling wedge pattern projection a couple of hundred points below this. Not bad work on both counts if we can get it. Obviously there will be plenty of ebbing and flowing before such levels can be attained yet we remain very optimistic that levels will eventually get there. Price has been in a big bearish downtrend now for 3 years so the initial choppiness to this move off the lows is naturally to be expected. Confidence appears to be returning by the day though and the technicals are also continuing to look quite robust overall at this very early stage.
Outside the big spike down reversal day in June, price appears to being driven higher at the moment by the strong Type-A bullish divergence that has triggered on the weekly chart. And it looks to still have plenty of upside left in it yet. Then we have the standout falling wedge pattern. With a break above 2335 and then 2445 required now to click this bullish formation into gear with the breakout target aligned to 3450. So some real positives continuing to be seen here moving forward. And if the Chinese Bourse can finally start kicking into gear over the next 12 months or so, which is the Wave-(A) vs Wave-(C) time equality point, then our own markets here in Australia are likely to be given more of a sustained boost as well. Interesting point to note is that the XSO (Small Ords) here in Australia also bottomed in unison with the Shanghai Composite. An unlikely coincidence in our view !
Trading Strategy
As we keep mentioning, September is generally not a great month for financial markets globally. Not that this Index for the past 3 years has really been attached to any seasonality issues. Its simply been in a massive downtrend. So even though we may expect some volatility elsewhere, it may not transfer fully into this part of the world as the recovery continues to take shape. From a trading perspective, and if our analysis does prove to be correct over time, then the difficult trading conditions, especially within our small cap stocks, may slowly yet surely start to subside. And not before time. Plenty of work still to do here, yet step by step price does appear to be making progress.
Re-published with permission of the publisher. www.thechartist.com.au All copyright remains with the publisher. The above views expressed are not FNArena's (see our disclaimer).
Risk Disclosure Statement
THE RISK OF LOSS IN TRADING SECURITIES AND LEVERAGED INSTRUMENTS I.E. DERIVATIVES, SUCH AS FUTURES, OPTIONS AND CONTRACTS FOR DIFFERENCE CAN BE SUBSTANTIAL. YOU SHOULD THEREFORE CAREFULLY CONSIDER YOUR OBJECTIVES, FINANCIAL SITUATION, NEEDS AND ANY OTHER RELEVANT PERSONAL CIRCUMSTANCES TO DETERMINE WHETHER SUCH TRADING IS SUITABLE FOR YOU. THE HIGH DEGREE OF LEVERAGE THAT IS OFTEN OBTAINABLE IN FUTURES, OPTIONS AND CONTRACTS FOR DIFFERENCE TRADING CAN WORK AGAINST YOU AS WELL AS FOR YOU. THE USE OF LEVERAGE CAN LEAD TO LARGE LOSSES AS WELL AS GAINS. THIS BRIEF STATEMENT CANNOT DISCLOSE ALL OF THE RISKS AND OTHER SIGNIFICANT ASPECTS OF SECURITIES AND DERIVATIVES MARKETS. THEREFORE, YOU SHOULD CONSULT YOUR FINANCIAL ADVISOR OR ACCOUNTANT TO DETERMINE WHETHER TRADING IN SECURITES AND DERIVATIVES PRODUCTS IS APPROPRIATE FOR YOU IN LIGHT OF YOUR FINANCIAL CIRCUMSTANCES.
Technical limitations If you are reading this story through a third party distribution channel and you cannot see charts included, we apologise, but technical limitations are to blame.
Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" – Warning this story contains unashamedly positive feedback on the service provided.