Shanghai: SSE Composite Index (.SSEC) trade lower on concern about China virus
The Chinese government announced there has been a fourth death from coronavirus. The outbreak, centered on the city of Wuhan, has sickened more than 200 people.
Authorities said some infections were transmitted person-to-person, increasing the risk the disease might spread faster during the Lunar New Year holiday.
The Shanghai Composite Index fell 1.4 percent, Hong Kong’s Hang Seng was off 2.8 percent and Tokyo’s Nikkei retreated 0.9 percent.
The Bank of Japan left its policy rate at -0.1 percent and reaffirmed its commitment to increase holdings of government bonds. Board members raised their projection of economic growth in the year that starts in April to 0.9 percent from 0.7 percent.
China’s stocks fell to two-week lows and the yuan retreated from six-month highs on Tuesday as worries grew about a new virus that has killed four people so far, after authorities confirmed it spread through human contact.
The new virus broke out just ahead of the Lunar New Year holiday – between Jan. 24 and 31 – from the central city of Wuhan to Beijing, Shanghai and other cities, with more than 200 cases reported so far.
Chinese blue-chip stocks shed 1.7% and Hong Kong’s benchmark Hang Seng Index lost over 2% – both lingering around their lowest levels since Jan. 8.
Shares of airlines, cinema and casino operators fell. But drugmakers across Chinese exchanges gained. The CSI 300 healthcare index rose 0.6%.
Remarks by Chinese President Xi Jinping to make curbing the outbreak a top priority drew investors’ attention to the depth of the crisis, adding to selling pressure, said an onshore-based broker.
The virus evoked memories of the 2002/03 outbreak of Severe Acute Respiratory Syndrome (SARS), which also originated in China and killed hundreds globally.
But Zhang Qi, a Shanghai-based analyst at Haitong Securities, said the Wuhan virus does not yet warrant a sell-off.
“We have more experience in dealing with diseases,” he said. “We will need to watch whether it spreads further, but so far the scale is not that big.”
Risk-off vibes also pushed the Chinese currency lower.
The onshore yuan lost about 0.4% to 6.8973 per dollar. It fell as much as 0.5% in offshore trading – past the 6.9 per dollar handle for the first time in almost a week.
The currency was on a tear earlier this month as China pledged to refrain from competitive devaluation, in a major de-escalation of trade tensions with Washington.
“Currently, (the Wuhan) virus might be the only reason explaining why market sentiment has changed all of a sudden,” a trader at a foreign bank in Shanghai said of the yuan’s U-turn.
Several traders in Shanghai said the trade deal-inspired appreciation was overdone, while noting that dollar demand usually rises among Chinese households and companies near the Lunar New Year for payments and overseas trips.
“Such purchases were held as the yuan kept strengthening in the last few weeks. And these pressures were released today,” said one of the traders.
Overall, the bias in prices is: Upwards.
By the way, prices are vulnerable to a correction towards 3,003.93.
The projected upper bound is: 3,114.86.
The projected lower bound is: 2,995.11.
The projected closing price is: 3,054.99.
A big black candle occurred. This is bearish, as prices closed significantly lower than they opened. If the candle appears when prices are “high,” it may be the first sign of a top. If it occurs when prices are confronting an overhead resistance area (e.g., a moving average, trendline, or price resistance level), the long black candle adds credibility to the resistance. Similarly, if the candle appears as prices break below a support area, the long black candle confirms the failure of the support area.
During the past 10 bars, there have been 3 white candles and 7 black candles for a net of 4 black candles. During the past 50 bars, there have been 28 white candles and 22 black candles for a net of 6 white candles.
Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.
One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 21.3485. This is not an overbought or oversold reading. The last signal was a buy 1 period(s) ago.
Relative Strength Index (RSI)
The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 51.49. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a sell 5 period(s) ago.
Commodity Channel Index (CCI)
The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is -175.This is an oversold reading. However, a signal isn’t generated until the indicator crosses above -100. The last signal was a sell 9 period(s) ago.
The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a sell 3 period(s) ago.
Rex Takasugi – TD Profile
SSE COMPOSITE closed down -43.646 at 3,052.142. Volume was 32% above average (neutral) and Bollinger Bands were 6% wider than normal.
Open High Low Close Volume___
Short Term: Neutral
Intermediate Term: Bullish
Long Term: Bullish
Moving Averages: 10-period 50-period 200-period
Close: 3,086.40 2,980.58 2,967.99
Volatility: 14 13 19
Volume: 22,336,622,592 18,865,045,504 20,235,737,088
Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.
SSE COMPOSITE is currently 2.8% above its 200-period moving average and is in an upward trend. Volatility is relatively normal as compared to the average volatility over the last 10 periods. Our volume indicators reflect moderate flows of volume into .SSEC (mildly bullish). Our trend forecasting oscillators are currently bullish on .SSEC and have had this outlook for the last 27 periods.