China A50 index to fall below the 500-week moving average?
China A50 index (
CN50), a measure of the Chinese onshore market that keeps track of 50 of the biggest Chinese A-share companies listed on the Shenzhen and Shanghai stock exchanges, broke a major upward trend that had been in place since 2016.
The technical picture sees the A50 index currently dominated by a descending channel pattern, having fallen 42% from its peak in February 2021, with prices now approaching a remarkable 500-week moving average.
Given the slowdown in the Chinese economy caused by the government's Zero covid policy, the downward trend in Chinese stocks has been ongoing for a while. However, the most recent sell-off has been triggered by a crumbling confidence among foreign investors as a result of Xi Jinping's reelection as president for a third term and a leadership reshuffle within the Politburo Standing Committee during the 20th National Congress.
The A50 index may not have reached its bottom yet, if the Zero-Covid policy and growing doubts about the new policymakers' plans for the country's economic future continue to dampen Chinese growth prospects. Even though the weekly RSI is beginning to exhibit extremely oversold conditions, which is extremely unusual for this market and hasn't happened since August 2011, bears still have total control over the index. But, given the wild price swings of the past few days, some technical and short-term price bounces could still happen.
The psychological 11,000 point level, which is down 7% from here, and the 10,200 point level, which was the low of January 2019 (down 14% from here), provide the next significant supports. The A50 will have dropped 50% from its peak if it reaches levels from January 2019, which might encourage some dip buying there.
CN50), a measure of the Chinese onshore market that keeps track of 50 of the biggest Chinese A-share companies listed on the Shenzhen and Shanghai stock exchanges, broke a major upward trend that had been in place since 2016.The technical picture sees the A50 index currently dominated by a descending channel pattern, having fallen 42% from its peak in February 2021, with prices now approaching a remarkable 500-week moving average.
Given the slowdown in the Chinese economy caused by the government's Zero covid policy, the downward trend in Chinese stocks has been ongoing for a while. However, the most recent sell-off has been triggered by a crumbling confidence among foreign investors as a result of Xi Jinping's reelection as president for a third term and a leadership reshuffle within the Politburo Standing Committee during the 20th National Congress.
The A50 index may not have reached its bottom yet, if the Zero-Covid policy and growing doubts about the new policymakers' plans for the country's economic future continue to dampen Chinese growth prospects. Even though the weekly RSI is beginning to exhibit extremely oversold conditions, which is extremely unusual for this market and hasn't happened since August 2011, bears still have total control over the index. But, given the wild price swings of the past few days, some technical and short-term price bounces could still happen.
The psychological 11,000 point level, which is down 7% from here, and the 10,200 point level, which was the low of January 2019 (down 14% from here), provide the next significant supports. The A50 will have dropped 50% from its peak if it reaches levels from January 2019, which might encourage some dip buying there.
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