The long awaited bubble burst in the Shanghai Index had finally burst as the index crashed 51.16% from its’ peak to recent trough, the next question traders have in mind is does the market found a valid floor at 3,000 level? Technically, 3,000 level has a strong historical basis of a valid support for the index, this area served as the first substantial consolidation area for the index prior to its’ bubble-like vertical rise. But this level has to be re-tested to confirm a valid bottom either in two ways: first, the index dropped again at this level and rebound then we have a double bottom or the index pull back and fill the gap it made last 4/24 then we have a higher low bottom.
However, the index may not take both possibilities because on a closer look using the line chart the index actually just broke-out from a small inverted head & shoulder reversal pattern last Wednesday; therefore, a re-test and consolidation above 3,650 support is more likely.
The index may open gap up on Monday, a normal spill-over of the strong upward momentum residue left last Wednesday and jump above its’ 50days moving averages but the index has to consolidate near 3,650 to build a strong base for its’ next leg up.
No comments:
Post a Comment