Chart of the day: One step at a time in Shanghai

The Shanghai Composite Index has broken the last but one Fibonacci retracement resistance level, though rather more slowly than we had hoped. In doing so, the lagging line has also broken above the top of the trend channel that started at the beginning of last year. The nine-week moving average has helped last week’s gains and the fact that it lies well above the 26-week moving average suggests decent bullish momentum. This has forced the Ichimoku cloud up, too, with its upward slant the steepest in two years. Though the index is overbought on the relative strength index, we expect our second target at 3,460 points to be surpassed and the highs in late 2015 at 3,670 might also be reached, though possibly not by the end of the year.

Nicole Elliott is a technical analyst