We have said repeatedly that emerging markets should be watched closely in 2016. It is no secret that the stock market of India is by far our favorite emerging market. Chinese stocks, however, should be high on your watch list as well. Although we have no indication that China’s stock market is about to break out, we do see that China stock analysis suggests a decision point is near.
The daily chart of the Shanghai Stock Exchange shows a textbook example of a market ready to start trending. Major resistance sits at 2700 to 2800 points. The descending trendline is about to touch support, which suggests a breakout or breakdown is near.
The weekly chart has a slightly different setup, though the outcome is not very different than the one on the weekly. There is a bit more wiggle room before coming to a decision point but the trading range on the weekly is narrowing down. As seen on the chart, the resistance line is hitting 3200 points and the support line is nearing 2700. Note how resistance is touching the 90 week moving average on the chart, making resistance at 3200 points even stronger. In other words, we can only become bullish on China stocks if Shanghai is able to cross 3200.
It seems that 2016 will be an important year for emerging markets. The stock market of India is attempting to break out, it is decision time for Chinese stocks on the shorter term timeframe and the longer term shows a narrow range. Investors should watch the above discussed price levels on the Shanghai Exchange closely.
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