Chart of the day: Bullish outlook for Chinese stocks
Price action in the futures of the top 300 A shares on the Shanghai and Shenzhen stock exchanges, which are traded on the China Financial Futures Exchange, has been subdued recently. Observed volatility is close to December’s record low and 1.6 standard deviations below the very long-term mean. The market has rallied neatly since Thursday last week, helped by support from the 200-day moving average and the trend line. Now testing the 50-day moving average, keeping this pair bullish, it has gone from oversold with bearish momentum to neutral on both of them. We expect the move to continue steadily through to 3,480 to 3,500 points, followed by a test of this year’s high at 3,550 points and last year’s high at 3,583 points.
Nicole Elliott is a technical analyst