SHANG­HAI COM­POS­ITE – UP­TREND IN­TACT

Finweek English Edition - - Creating wealth -

Trend: Short term down; medium and long term up. Strat­egy: Traders sell short the bounces. In­vestors hold. This chart (top) shows China’s Shang­hai com­pos­ite in­dex hav­ing an enor­mous rally dur­ing 2006, ris­ing 130% in one year. In­ter­est­ingly, the re­cent 9% drop in one day is a mi­nor blip on the chart, given the enor­mous rally of 2006. Right now the in­dex is in fact con­sol­i­dat­ing from a solid run-up over the past six months (in par­tic­u­lar) and there’s no rea­son for con­cern at all based on the cur­rent chart. • The weekly sto­chas­tic os­cil­la­tor (bot­tom seg­ment) shows more down­side to come in the short term be­fore it be­comes over­sold. This, I be­lieve, is merely part of a nat­u­ral cor­rec­tion in price. Mar­ket play­ers, how­ever, do need to be aware of an­other sell­ing spree to come. If trad­ing this in­dex, sell short for a drop to 2400 (the price at time of writ­ing is 2840). That’s an­other 15% down­side on this in­dex (which will be much less than that on the JSE and other world mar­kets). That will set up an ex­cel­lent buy­ing op­por­tu­nity lower down. Fi­nally, a clos­ing price above 3000 again on this in­dex (the 2007 highs) will be a very bullish sign.

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