Technical Analysis – CHI50 stock index flies to new 1-year peak but enters overbought zone
Posted on April 10, 2019 at 9:17 am GMT
Christina Parthenidou, XM Investment Research Desk
China’s 50 stock index experienced fresh buying interest after beating resistance around the 13,100 level, with the price spiking to a new one-year high of 13,917 early on Wednesday.
While the RSI and the stochastics warn of an overbought market and the MACD suggests a softer trading in the short term as the indicator seems to be losing steam above its red signal line, the market needs to weaken back below 13,100 and the 20-day moving average for traders to resume cautious behavior. The level also coincides with the 61.8% Fibonacci of the one-year old downleg from 14,914 to 10,197. Hence any decisive close below that mark, could shift support down to 12,374, where the price rebounded in late-March. Moving lower, another key barrier is likely to emerge around 11,900 which if broken would switch the medium-term outlook from bullish to neutral.
In the positive scenario, a close above 13,917 and the 78.6% Fibonacci may transform the December uptrend to a more concrete one and fuel further buying interest. In such a case, resistance could initially appear near 14,200 and then at 14,632 before the focus shifts to the 14,914 top.