Chart of the day: Momentum building in Shanghai stocks
The correction and consolidation in the Shanghai Composite Index in December have resulted in a burst higher at the start of this year, with the heavy lifting done by stocks listed in Shanghai rather than Shenzhen. Because momentum is bullish again and it is no longer overbought on the RSI, we expect our second target at 3,460 points to be surpassed to reach the high in late 2015 of 3,685 soon. If we can hold above the nine-week moving average (currently at 3,352 points), this should set up for a retest of the top of the long-term trend channel by the lagging line. Note that the weekly Ichimoku cloud, while thin, continues to trend higher through to the second quarter of this year.
Nicole Elliott is a technical analyst