TECHNICAL ANALYSIS: China A50 (UPDATED WEEK 51) 22nd Dec 2018

Ticker: 2823:HK (China A50 Index)

The iShares FTSE A50 China Index ETF seeks to track the investment results of an index composed of the 50 largest companies in mainland China, trading on the Shanghai and Shenzhen Stock Exchanges.

 

The technical analysis would be segregated into 2 parts

  1. Short Term – This would be updated once a week (Next update – weekly)
  2. Mid/Long Term – This would be updated once a month (Updated 22nd Dec!)

Important Note 1: Past dated analysis is after the Mid/Long Term Analysis below. This is for us to track our past track records.

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Short Term analysis (Updated 22nd Dec 18):

Using the daily candle stick with a time frame of 2-3 years, we have the below observations:

 

  1. As mentioned last week, technical analysis of 2823 shows that the chart is weak and it has re-tested 11.8 where the support did not hold.
  2. This is a bearish sign and the next level would be 10.30-10.50 range as mentioned
  3. RSI, MACD, Oscillation & Stoch are all showing weakness where RSI would be expected to get into oversold mode in the upcoming week
  4. The reason for 10.30-10.50 is due to Fibonacci retracement of 23.6%.
  5. As the chart is nearing the critical support, I would be updating the mid/long term chart for better reference on where are we on the market cycle.

 

 

 

Mid & Long Term Analysis (Updated 22nd Dec 18):

As 2823 is fairly new, we will be covering both Mid & Long Term analysis together

 

  1. As mentioned earlier, with a larger time frame of 11 years, we can see that 2823 has a low of 6.86 and a high of 28.90.
  2. We can see that the critical support of 11.80 is broken and basis TA, the next 2 level of support would be around 10.30 and 8.42
  3. All indicators are pointing to immediate bearish chart.
  4. Important Note: Despite Trade war, the Fundamentals of China is still very strong.

 

 

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Short Term analysis (Updated 16th Dec 18): Actual in line with expectations, market weakness, 2823 to head to 10.50 range

Using the daily candle stick with a time frame of 2-3 years, we have the below observations:

 

  1. As mentioned last week, retracement has happened and it would most likely be re-testing 11.8 level and downward price action during the week have been supporting this.
  2. RSI, MACD are still showing slight weakness whereas Oscillation is showing early signs of reversal
  3. We might be seeing a “touch and go” situation in the upcoming week where once the support is hit it would rebound up.
  4. The retracement has also caused MACD and Oscillation to get back into down trend mode
  5. Do note that in trading nothing is certain, we would still need to apply the regular stop losses in case market is not reflecting as per analysis. For 2823, in case of breakdown, the next level would be at the range of 10.50

 

 

 

 

Short Term analysis (Updated 8th Dec 18): Actuals in line with expectations.

Using the daily candle stick with a time frame of 2-3 years, we have the below observations:

 

  1. As mentioned last week, due to the ease of tension of trade war between US & China, the immediate market sentiment is bullish and as expected, 2823.HK has done a 3% gap up on Monday morning. In short term trading, we have adjusted the “stop loss” level to above buying price and this has helped us really well when retracement happens.
  2.  With the retracement, we can see that the gap up is still within the short term down trend chart and 2823.HK would be likely to re-test 11.8 level in the upcoming week before going back up.
  3. The retracement has also caused MACD and Oscillation to get back into down trend mode
  4. Note: The strong support at around 11.8 level mentioned last week is still valid at this juncture.
  5. On moving averages, the chart is currently trading below 50, 150 and 200 days of moving average (MA) which signifies that trend is still on a downtrend
  6. In conclusion, while Short term chart trend is still on a down trend and likely to re-test support of 11.8 area in the upcoming week.
  7. Do note that in trading nothing is certain, we would still need to apply the regular stop losses in case market is not reflecting as per analysis. For 2823, in case of breakdown, the next level would be at the range of 10.50

 

 

 

 

 

Short Term analysis (Updated 2nd Dec 18): Outcome as per analysis

Using the daily candle stick with a time frame of 2-3 years, we have the below observations:

 

  1. 2823 is currently at the bottom of the downtrend with a very strong support at around 11.8 level (do note that in trading, we always have to allow us some form of margin of error to it).
  2. “Very Strong Support” is deduced by the fact that it coincides with 38.2% Fibonacci retracement as well as the key resistance turn support seen in 29 Nov 2016. This level have been supported 5 times so far (2nd Jun 17, 14 Jun 17, 18 Oct 18, 30 Oct 18, 23 Nov 18)
  3. Fundamentally, we have noted the China-US Tariff issue have made some progress where both have agreed to halt further increment of Tariffs for 90 days. We would expect the market to price this news as positive and adjust accordingly on the same.
  4. Getting into the immediate term chart, we can see that the Strength of MACD and Oscillation are reversing up
  5. On moving averages, the chart is currently trading below 50, 150 and 200 days of moving average (MA) which signifies that trend is still on a downtrend
  6. In conclusion, while Short term chart trend is on a down trend, there would be a higher probability for a trend reversal to happen due to
    1. Strong support at 11.8 area
    2. Fundamental change due to G20 discussions which happened on 1st Dec 18
  7. Do note that in trading nothing is certain, we would still need to apply the regular stop losses in case market is not reflecting as per analysis. For 2823, in case of breakdown, the next level would be at the range of 10.50

 

Mid & Long Term Analysis (Updated 2nd Dec 18): 11.8 support did not hold

As 2823 is fairly new, we will be covering both Mid & Long Term analysis together

 

  1. With a larger time frame of 11 years, we can see that 2823 has a low of 6.86 and a high of 28.90.
  2. Similar to the analysis of Short term, we can see that in the Mid/Long term chart has a key resistance turn support level of around 11.8 (we can accept a margin of error of 0.3)
  3. Key important factor is 2823 had done a change of trend around May 2014, back tested the same in Jan 2016 for confirmation of the change of trend. From Jan 2016 onward it has resumed its uptrend and has broken up the key resistance level of 11.8 in Jun 2017.
  4. As on date (2nd Dec 2018), we are seeing yet another back testing happening to confirm the support of 11.8. This level is also the best risk to reward from trading point of view.
  5. Should the support be able to hold, 2823 would resume its uptrend in time to come.
  6. Important Note: This is in line with the fundamental changes happening in China which I would be sharing the same when the time is right.