CHINA50 trade ideas
CHINA 50! ROCK OR BUST?The China 50 took off like a rocket, leaving behind the DJI and other country indices. This is the CN50's biggest rally in a year. State media agencies talked up the index promising a post-coronavirus boom. Then the China Securities Journal made similar promises.
This caused an almost 6% charge north in one day! However, there did not appear to be significant underlying volume - which is a bit worrying.
But volume isn't everything. I show two points on the chart that I think may be comparable. In technical terms the two recent weekly candles are the biggest since 2013. The momentum seen on lower time frames is ridiculous. In these situations a minor correction is expected (not predicted), followed by follow through. If you have enough 'bottle' and money to burn go for it, on a lower time frame.
Disclaimers : This is not advice or encouragement to trade securities. No predictions and no guarantees supplied or implied. Heavy losses can be expected. Any previous advantageous performance shown in other scenarios, is not indicative of future performance. If you make decisions based on opinion expressed here or on my profile and you lose your money, kindly sue yourself.
China plummets as data shows patched recoveryAfter a 24% rally in their stock market from the start of July, the Shanghai Composite index saw a sharp reversal down 17% as data shows a patched recovery in China.
Bloomberg reporting industrial output was lower by 1.3% while retail sales plummeted 11.4%, showing strong weakness in the consumer, which use to be the backbone of many economies. Michelle Lam, China economist at Societe General SA in Hong Kong, stated that the recovery was “driven by credit stimulus as evident in the strong infrastructure and property investment, while the recovery in sales in retail sales and private investment has continued to lag.”
It is interesting to note that the strong infrastructure and property investment gains are on the back of the PBOC’s wary of cutting rates earlier in the year when the Coronavirus hits. In favour of a more direct approach, China issued bonds, facilitated direct lending and lowered the reserve ratio required for banks to provide liquidity into the money markets. These measures injected more than 1.7 Trillion Yuan ($220 Billion) of liquidity into the money markets. This is a stark contrast to how 38 other central banks around the world tackled the Coronavirus early this year by slashing interest rates. Michelle continues, stating that “Policymakers will probably save bullets and hold back broad-back easing and find the current growth trajectory acceptable.” This sentiment is backed by Ma Jun, a PBOC adviser, stating that “the PBOC doesn’t use all its bullets at once. China has plenty of room in monetary policy.”
China has been giving investors something to cling on to
The recent bull run has given many Chinese retail traders great euphoria. Bloomberg documented Min Hang, who opened her trading account, stating that “There is no way I can lose” and that “ feels invincible.” The rally added $1 Trillion of value in the span of 8 days, topping China’s equity market valuation to 10 trillion – the top of the bubble in 2015. However, being known as the world’s manufacturer, China continues upward hinges on the global economy to recover. Ding Shuang, chief economist for China and North Asia at Standard Chartered, stated that Coronavirus around the world continues to affect businesses around the world, which “may weaken demand for China’s goods and services and is the main risk facing China’s economy.”
This highlights a significant problem with Globalization: Dependency with all the other markets. Amid a trade war between China and the United States, Globalization faces an imminent threat akin to mutually assured destruction. With both countries’ interests in the forefront of their foreign policy, they are blinded to the fact that in this day in age their rely on each other more than they give each other credit for.
Are you riding China’s bull market?
CHN50 - SELLSo after last weeks better than expected results for the Chinese economy, the price broke out parabolically of its uptrend.
As you can see on the weekly TF, the price is currently at all-time highs and has twice previously been at this level and rejected. I expect there to be some selling pressure at this price point.
Always difficult to accurately predict the depth of the pullback, but back towards the top of the trend line seems like a decent target.
Look for reversal candles before entering the sell position.
All the best
Good chance to get in or accumulate China A50It has reached a high of 13,942 from 8 June to 24 June without able to breakout higher. This calls for a short term sell opportunity.
Expect it to break down from the bullish trend line and heads towards 13,337 over the next few weeks.
This discount will present a great buying opportunity for those who have yet to come onboard China index.
CN50 H4 SHORT PRICE ACTION FORECAST - UPDATE-After three days with the position placed, the price finally is moving downwards. Price action reached a level where I usually close half of the position running and move the S/L to BE.
To what is known as a "risk-free" trade.
Will keep a close look to find a better place to trail de S/L. I will keep the comments as a trading update.
CN50 H4 SHORT PRICE ACTION FORECASTCHINA A50 found rejection from a critical resistance level from the ascending channel. Price action making a tweezer top candle. MACD is showing diminished bullish momentum, together with a clear divergence for confluence on the bearish bias.
Price in consolidation.
The order:
Type: sell-stop.
S/L: 20 pips - R:R | 1:2 -
T/P: aiming to the next supply zone + ascending channel support
What colour is your parachute ?Read article here
When compared to YINN , you may think that it does not move as high as CN50 from the look on the chart. Please note that this is leveraged ETF, which is a 3x multiplier on the bull side.
YINN is suitable for those who can tolerate a higher amount of risks and this can be used sparingly for short term trades. Currently, the US-CHINA tension is rising so if CN50 falls, so will YINN as well. And that is 3x effect, make sure you can stomach it before attempting.
You have been forewarned. When trading, always understand the risks first, not the rewards as the latter can be so tempting (that is what the brokers have to do to earn your money) that you forgot about the risks. It is good to be optimistic, confident and getting into action but do it slowly not abruptly.
Time to go all in for China A shares ?Read positive news here and here
I am of the opinion dips are for further accumulation as I am bullish on China story for the long term.
But I won't recommend going all in or show hands with China A shares. There are still many unknown factors in the market , Q2 GDP data, unemployment in China, business activities , US-China trade war, Huawei saga, investigation of China on independent Covid-19 virus spread, etc.
So, do diversify your risks , calculate your position sizing, always have a Stop Loss and manage your positions, not taking for granted things will go the way you want. Have contingencies.
Of course, the longer your time frame of holding , the less concerned you are with the daily volatility.
Potential Buy on China50 IndexWhat we saw was price breaking a short downtrend with a lot of aggression
After the break we came across a solid supply zone which we couldnt overcome because the bullish momentum on the zone was really high, so price rallied back down to our previous demand zone where it shot from
Price has been failing to break this zone, which can be an indication that theres a reasonable amount of bullish pressure being injected from this zone, and we can anticipate a move to the upside
Be cautious also of the fact that if the zone can break then we can anticipated strong bearish moment, so protect your account with a tight SL
CN50 sellsTechnicals:
D1 downtrend, bearish gartley, at resistance
H4 pinbar
Possible head and shoulders formation on D1 over the next few weeks
