Shanghai: SSE Composite Index (.SSEC) lacks support from economic fundamentals

Shanghai: SSE Composite Index (.SSEC) lacks support from economic fundamentals

Shanghai: SSE Composite Index (.SSEC) lacks support from economic fundamentals

China stocks ended higher on Tuesday as Beijing and Washington appeared to edge closer to a trade deal, but worries about economic headwinds at home tamed the market’s rise.

At the close, the Shanghai Composite index was up 1.1 percent at 3,060.31 points, while the blue-chip CSI300 index was up 0.7 percent.

CSI300’s financial sector sub-index was higher by 0.6 percent, the consumer staples sector fell 0.4 percent, healthcare shares rose 0.1 percent.

The smaller Shenzhen index ended up 1.7 percent and the start-up board ChiNext Composite index was higher by 2.6 percent.

Chinese Vice Premier Liu He held a telephone call with U.S. Treasury Secretary Steven Mnuchin and U.S. Trade Representative Robert Lighthizer on key issues in their trade talks on Tuesday, Chinese state news agency Xinhua reported in early trade.

Aided by optimism around the trade talks, valuations of Chinese stocks have ticked up this year, though the market remains one of the cheapest in Asia, Refinitiv data showed.

“The major driver (for rally) is the recovery in valuations,” analysts at Huatai Securities, who see the Shanghai Composite Index steadying between 2,800 and 3,000 points, wrote in a note on Tuesday. “But for the index to go further, (economic) fundamentals need to co-operate.”

China will release a slew of economic data on Thursday, including industrial output, retail sales and fixed-asset investment for the combined period of January and February. **

Data on Monday showed China’s automobile sales fell 13.8 percent in February from the same month a year earlier, marking the eighth consecutive month of decline.

Sources told Reuters that the People’s Bank of China was studying the potential impact of interest rate overhaul to loan pricing, just as speculation grows over whether the central bank will cut interest rates soon to support the slowing economy.

China may increase its tolerance for non-performing loans at small companies in order to help spur their growth, the state-backed Securities Times newspaper quoted a senior official from the banking regulator as saying on Tuesday.

Overall, the bias in prices is: Upwards.

Note: this chart shows extraordinary price action to the upside.

By the way, prices are vulnerable to a correction towards 2,814.98.

The projected upper bound is: 3,186.85.

The projected lower bound is: 2,955.52.

The projected closing price is: 3,071.19.

Candlesticks

A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 8 white candles and 2 black candles for a net of 6 white candles. During the past 50 bars, there have been 34 white candles and 16 black candles for a net of 18 white candles.

A rising window occurred (where the top of the previous shadow is below the bottom of the current shadow). This usually implies a continuation of a bullish trend. There have been 6 rising windows in the last 50 candles–this makes the current rising window even more bullish.

Momentum Indicators

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.

Stochastic Oscillator

One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 32.5334. This is not an overbought or oversold reading. The last signal was a sell 2 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 68.88. 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 2 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 78. This is not a topping or bottoming area. The last signal was a sell 2 period(s) ago.

MACD

The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a buy 41 period(s) ago.

Rex Takasugi – TD Profile

SSE COMPOSITE closed up 33.315 at 3,060.307. Volume was 144% above average (neutral) and Bollinger Bands were 145% wider than normal.

Open High Low Close Volume___
3,049.0843,093.3913,029.9003,060.30751,117,314,048

Technical Outlook
Short Term: Neutral
Intermediate Term: Bullish
Long Term: Bullish

Moving Averages: 10-period 50-period 200-period
Close: 3,023.63 2,696.52 2,748.57
Volatility: 34 26 26
Volume: 47,748,263,936 24,717,109,248 16,649,060,352

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.

Summary

SSE COMPOSITE gapped up today (bullish) on normal volume. Possibility of a Runaway Gap which usually signifies a continuation of the trend. Four types of price gaps exist – Common, Breakaway, Runaway, and Exhaustion. Gaps acts as support/resistance.

SSE COMPOSITE is currently 11.3% above its 200-period moving average and is in an upward trend. Volatility is extremely high when compared to the average volatility over the last 10 periods. There is a good possibility that volatility will decrease and prices will stabilize in the near term. 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 35 periods.

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