It has been difficult to earn money with Chinese stocks over the last decade. The Shanghai Composite index went into a sideways pattern after reaching its all-time high in 2008. The market cycles behaved violently. Subwaves were typically sharp and strong. Our primary wave A° as well as intermediate wave (W) had the characteristics of market crashes. We are witnessing a triangle pattern of cycle degree in the Shanghai Composite Index.
The triangle is about 60%-70% percent from its end with respect to time. Moreover the bottom is likely the 2008 low. It will not be retested unless the triangle morphs into a barrier pattern. Last but not least, primary wave C° appears to trace out a complex structure. This fits very well into elliott waves guidelines.
Our technical analysis on the Shanghai Composite index concludes more sideways action for the years down the road. The triangle will eventually resolve to the upside. However, we project this to occur past 2020.
A trading approach will continue to outperform a simple buy-and-hold strategy.
We are bullish for Chinese equities short term.
Market action trended to the upside since January 2016. This occured in a choppy manner. Wave A counts best as an expanding leading diagonal. The subsequent wave B correction traced out an irregular flat.
The strucuture's C-wave of minor degree started in May 2017. It will extend to the upside. Wave C’s structure shows only 3 waves to the upside as we publish this update. This is not a terminal pattern to the upside and requires followthrough of some form. Moreover momentum indicators are showing increasing strength. We therefore forecast that minute wave iii° just started. It will target into the 3,800-4,000 points range.
About The Author
Our background lies in economics and trading. We have been trained at reputable universities and worked as proprietary traders as well as portfolio managers throughout the past couple of decades. We started exploring the field of behavioral economics due to self-interest in the late 90’s.
Our goal is to contribute outstanding technical analysis and forecasting. We focus on the most liquid assets that are subject to worldwide public attention.
Please visit us for regular updates on the Shanghai Composite Index here
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.