China continues to struggle and the $DJSH (just DJSH on Yahoo Finance, among others) shows the critical juncture it is now at. I believe the 400 level on the DJSH is technically very significant. ( http://ift.tt/1QFVmOz )The Dow Jones Shanghai Index started challenging this level in 2009 (it has shot above it before the 2008 global collapse) and failed to breach it on five different occasions. Three of those failures occurred almost on top of the 400 line. You can see at the bottom left of the chart below the successful breach of that level in December 2014. Repeatedly in 2015, 400 became support. The rally that began in Chinese equities in the end of January this year culminated with a failed attempt to recapture long term support (#2). Once a decisive move above 400 failed, you can see investors ran for the exits, crushing the Relative Strength Index (#3) and just about guaranteeing a short term test of most recent support in the 358 area. As you can see from looking at the grid lines, the Index, like all indices, likes round numbers. Support and resistance tend to develop around big round numbers since humans tend to think, and make trading decisions at those points of a trading range. The problem with the 358 level is it is weak, and it's not a round number. The chance of it failing is high. If it does, and the Dow Jones Shanghai Index closes below 350, the next legitimate support level is at 300. A drop of the $DJSH to 300 would represent about another -15% move and make the drop from last years high over 60%.Note that the chart is intentionally not logarithmic. Thanks, good trading!
Submitted February 29, 2016 at 12:53AM by Recon_Pete http://ift.tt/1oRTqg5
No comments:
Post a Comment