Is China ready to rally?

November 22, 20123 Comments


The HSBC Purchasing Managers Index (PMI) for China showed the first expansion in activity in seven quarters when it came out Thursday. The Shanghai Composite Index chart above shows  a recent tendency for this index to find support at around 2000. Its downtrend was broken back in October, as noted by the trendline I’ve drawn. The composite looks to be establishing a base. RSI indicates a near-termed bounce is probable. Resistance will be met at the now-flat 50 day MA somewhere around 2080. Bigger resistance comes in at 2150 on the charts, where the index has failed twice. A breakout through 2150 would imply a new bull market trend may ensue.

Aggressive players might choose to play a potential bounce from current levels. Conservative investors might wait for a break through resistance before buying. A failure to hold above 2000 would imply major problems for the Shanghai index. I am unaware of any pure play ETF’s on the Shanghai index, and would welcome readers to post any that they might be aware of. Marketvectors does have a China ETF (PEK-US) that displays a similar trading pattern to the Shanghai composite.




  • Hi Kieth,

    If the Shanghai has a potential for a move up. Do you think that copper and base metal stocks could also be poised for a move up?

    Thank you,


    • There can be some upside in base metals as you say. I’d also like to point out that you must watch that vital 2000 level on the Shanghai index–it is key support that would change the outlook for that market.


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