China Stock Market Update

FXI (Large Cap China) Weekly

FXI Weekly 3-5-2016

This is the exact same chart (with updated prices of course) from the 1/17 post (Know This Level in the Chinese Stock Market).  We were looking for a low near 27 back then and remarked that “former support (line that was support in August…it’s near 34) will eventually be of interest as resistance.”  FXI made low at 28.10 (before ‘ideal’ support) on 2/11.  The market is up a bit over 17% from the low and closing in on 34.  Be aware of the potential for resistance near 34 (year open is 34.14, the inverse head and shoulders objective is 34.36, and the 50% retracement of the decline from October is 34.30).

FXI Hourly

FXI 60m 3-5-2016

In the event that sellers respond in the 34.00s, watch for support to register just above 31 (1/29 high at 31.23 and 2/22 high at 31.37).  A drop into 31 around the 15th or so would be especially interesting given the intersection between the horizontal level and the trendline that extends off of the April and October highs (was good resistance throughout November and December) at that time.  A hold on a back test of former resistance would reinforce the sustainability of the February low.  From an Elliott standpoint, it’s possible that a drop into the 31 handle later in the month would constitute a small 2nd wave within a series of 1st and 2nd waves (1-2-i-ii base).  It’s also possible that a move into the 34s (especially if a blow-out type move on high volume) would complete a 3 wave (corrective rally) from the 2/11 low.  From a trading standpoint, it’s best to be flexible and enter commitments as the market responds to the levels laid out (‘clean’ levels in this market should help navigate AUD/USD too).  The weight of evidence will more strongly favor one scenario over the other as price, pattern, and momentum evolve.

-JS