Shanghai: SSE Composite Index (.SSEC) nearing the highest levels seen that year

Shanghai: SSE Composite Index (.SSEC) nearing the highest levels seen that year

Shanghai: SSE Composite Index (.SSEC) nearing the highest levels seen that year

Chinese stocks rose to their highest level since June as signs of progress in trade talks and the breaking of a key resistance level added to confidence. Shares pared gains in afternoon trading as investors took profit.

The Shanghai Composite Index climbed 1.1 percent at the close, paring a gain of as much as 3.2 percent after smashing through the 3,000 level that had capped gains all last week. About seven stocks rose for each that fell on the gauge. The index has now climbed 23 percent since its Jan. 3 low, helping add some $1.5 trillion in value to China’s stock market.

Momentum in China’s stock market hasn’t been this strong since the peak of the bubble in 2015. The Shanghai Composite’s relative-strength index is nearing the highest levels seen that year. Almost all of its 1500-odd members are above their long-term moving averages, showing the rally is also the broadest since 2015. Turnover has surged after falling to near a four-year low in December.

“The market’s gone crazy,” said Chen Weining, a fund manager at Miyuan Investments in Beijing. “Technical levels are bullish but we need to make sure we don’t repeat the mistakes of 2015.”

The newfound euphoria is a sharp contrast to the mood that persisted last year, when concern about U.S. tariffs and a slowing economy sent the Shanghai index plunging 25 percent. Since then Chinese authorities have loosened curbs on equity trading imposed in the wake of the 2015 stock market collapse and taken steps to stimulate growth, while improving ties with the U.S. have added to the upbeat tone.

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 2,745.10.

The projected upper bound is: 3,134.51.

The projected lower bound is: 2,936.39.

The projected closing price is: 3,035.45.

Candlesticks

A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 6 white candles and 4 black candles for a net of 2 white candles. During the past 50 bars, there have been 30 white candles and 20 black candles for a net of 10 white candles.

A long upper shadow occurred. This is typically a bearish signal (particularly when it occurs near a high price level, at resistance level, or when the security is overbought).

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 5 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 78.9842. This is not an overbought or oversold reading. The last signal was a sell 0 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 82.09. This is where it usually tops. The RSI usually forms tops and bottoms before the underlying security. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a sell 7 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 123.This is an overbought reading. However, a signal isn’t generated until the indicator crosses below 100. The last signal was a sell 19 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 35 period(s) ago.

Rex Takasugi – TD Profile

SSE COMPOSITE closed up 33.571 at 3,027.575. Volume was 181% above average (trending) and Bollinger Bands were 164% wider than normal.

Open High Low Close Volume___
3,015.9433,090.7963,006.9423,027.57552,564,942,848

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

Moving Averages: 10-period 50-period 200-period
Close: 2,889.21 2,637.53 2,752.13
Volatility: 33 23 25
Volume: 39,249,854,464 20,009,170,944 15,495,305,216

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 heavy volume. Possibility of a Breakaway Gap which usually signifies the beginning of a major market move. Four types of price gaps exist – Common, Breakaway, Runaway, and Exhaustion. Gaps acts as support/resistance.
SSE COMPOSITE is currently 10.0% 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 very strong flows of volume into .SSEC (bullish). Our trend forecasting oscillators are currently bullish on .SSEC and have had this outlook for the last 29 periods. Our momentum oscillator is currently indicating that .SSEC is currently in an overbought condition. The security price has set a new 14-period high while our momentum oscillator has not. This is a bearish divergence.

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