Chart of the day: Upside potential in ChiNext
The ChiNext price index tends to surprise, no more so than during its drop in mid-January when it hit a record oversold reading yet historical volatility was still one-sixth of 2015’s peak. It has now recovered from the 1,780-point area, also the low in the third quarter of 2015, underlining the importance of chart support. Steady upward progress has been made, with the nine- and 26-day moving averages turning bullish. This week started with a bang, bursting with a strong Marabuzo candle through Fibonacci retracement resistance at 1,943 points. There is also further upside potential to the 50 per cent retracement level at 1,992 points, which coincides with the upper edge of a flat-topped cloud. Expect a week or two of hesitation around here and then up again.
Nicole Elliott is a technical analyst