9 Jul 2015
Shanghai Composite Index: Dead cat bounce? – Rabobank
FXStreet (Barcelona) - Piotr Matys of Rabobank, uses Elliott Wave Analysis to offer the technical outlook for the Shanghai Composite Index, expecting the index to see a bottom around 3000 before heading higher towards 6124.04.
Key Quotes
“The impressive rally from Q4 2014 to June high at 5178.191 was wave (I) of the predominant long-term upside trend marked as the blue dash line on our weekly chart. This wave was formed by 5 smaller waves [(1)..(2)…..(5)]. The brutal selloff over the past few weeks is part of the corrective wave (II) formed by smaller waves (A, B, C).”
“Today’s rebound could be a beginning of wave (B) towards 4100/4000 resistance area. However, this recovery (driven mainly by various measures implemented by desperate Chinese officials to stabilise the market) could be a classic “dead cat bounce”. In due time wave (C) should unfold, which would complete the corrective wave (II).”
“Based on that, the SHCOMP should find a proper bottom at around 3000 level, which coincides with the Fibonacci 76.4% retracement of the wave (I). From this level wave (III) would unfold within the long-term upside trend (driven perhaps by more stimulus from the PBoC?). Given that wave (III) is usually the longest, the all time high at 6124.04 would be a valid target.”
Key Quotes
“The impressive rally from Q4 2014 to June high at 5178.191 was wave (I) of the predominant long-term upside trend marked as the blue dash line on our weekly chart. This wave was formed by 5 smaller waves [(1)..(2)…..(5)]. The brutal selloff over the past few weeks is part of the corrective wave (II) formed by smaller waves (A, B, C).”
“Today’s rebound could be a beginning of wave (B) towards 4100/4000 resistance area. However, this recovery (driven mainly by various measures implemented by desperate Chinese officials to stabilise the market) could be a classic “dead cat bounce”. In due time wave (C) should unfold, which would complete the corrective wave (II).”
“Based on that, the SHCOMP should find a proper bottom at around 3000 level, which coincides with the Fibonacci 76.4% retracement of the wave (I). From this level wave (III) would unfold within the long-term upside trend (driven perhaps by more stimulus from the PBoC?). Given that wave (III) is usually the longest, the all time high at 6124.04 would be a valid target.”