International Investors: Watch China Closely As It Is Close To Breaking Out
One of the main themes of our blog is to stay focused on what the charts are saying to investors. In other words, we recommend to not listen to opinions of media, gurus, experts, financial institutions, etc.
The point is that you never know WHY exactly someone is making a point. Most likely, there is an underlying personal benefit.
Charts are unbiased. Yes, admittedly, there is manipulation in the market and governments are intervening and futures markets are subject to high frequency trading. But at the end of the day all those actions do not fundamentally change anything to the fact that charts contain the collective actions of all market participants.
The above introduction is meant to come to a very interesting insight about China.
The Chinese stock market is thought to be in a huge bear market, because it crashed last year and because ‘everybody’ believes that China’s economy will collapse.
Well, we have news for you, China is potentially ready for a big breakout, which would lead to a new bull market.
We should not anticipate a new trend, though, so in order to comply with our own principles we must wait until a breakout is a fact.
The other side of the story is that China’s stock market would break down. Based on the chart pattern and ongoing trends in emerging markets, the odds favor a breakout, at least at this point given current market conditions.
As the chart of the Shanghai Stock Exchange shows, the Chinese stock index is only 2 percent away from breaking out. The breakout point comes in at 3100 points. In case the index would fall below 2850 points, it would be a sign that a bear market is unfolding.
As said, we believe a breakout is brewing, no matter what the headlines about China say and how strong some experts oppose that idea. Our chart tells otherwise.
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