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Chinese Equities Prepare For A Breakout

Published 08/14/2016, 06:33 AM
Updated 07/09/2023, 06:31 AM

Chinese equities might be on the verge of a strong breakout. This week's price action pushed the SSE (LON:SSE) 50 Index to the horizontal resistance at 2,225 levels. Since the beginning of 2016, SSE 50 has been recording higher lows, a bullish signal. Another week of strong price action can clear the 8 month-long resistance and push the index towards 2,500 levels. Volatility is low both on the daily and weekly charts suggesting a trend period might develop after a decisive breakout.

China SSE 50 Index Weekly Chart
China SSE 50 Index Daily Chart

There are several bullish chart set-ups in Hong Kong listed securities. I share below some of the clear chart patterns that are likely to resolve on the upside if we see a breakout on the Chinese benchmark equity index.

HK Weekly Chart

MGM China Holdings Ltd (MU:M04)

It has formed a year-long H&S bottom, a bullish reversal chart pattern, with the neckline standing at 12.20 levels. Breakout above 12.20 can push the stock higher to test 17-18 area.

TONGDA Group Weekly Chart

Tongda Group Holdings Ltd (HK:0698)

It has formed a year-long ascending triangle, a bullish continuation chart pattern, with the strong horizontal resistance standing at 1.69. Breakout above 1.69 can push prices towards 2.0 levels.

PING AN Weekly Chart

Ping An Insurance (HK:2318) is now testing the horizontal resistance at 38.80. Stock closed slightly above the resistance. However, this week's price action will confirm the breakout. Another strong weekly close will complete the multi-month base formation.

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