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Earnings flood from China's stocks: Is a turnaround on the horizon?
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Chinese Markets Tactical Gameplan

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Trader’s Edge joined discussion · Oct 18 18:20
Chinese Markets Tactical Gameplan
Background
So very recently, China's central bank, the PBoC, made a move to further support the markets. This comes as data that shows that the Chinese economy saw the slowest expansion since last year. The almost instantaneous stimulus push sent a strong signal to investors that the Chinese government is serious about preventing the economy from slowing down any further. The proverbial line in the sand has been drawn. As shared during my Q4 2024 outlook, the Chinese government will do what it takes to meet the 2024 growth target of 5%.
How Are The Markets Reacting?
Chinese stock indices rallied, not surprisingly, as the market has been purely driven by sentiment and intent in recent weeks. (All figures below are correct as of 18th Oct 2024)
The question that should be on every investor's mind now would be: "Is this a dead-cat bounce? Or will this transpire into a 2nd stage rally?"
The Gameplan:
Well, all traders and investors should have a gameplan. And here, I share with you all my preferred scenario and my alternative scenario. We have a main plan, then we have a plan in case our main plan does not work out. Here, I would like to first define that the strategies below are purely for a tactical short term play. We are looking anywhere between a 1-2 weeks horizon.
Main Plan (Preferred Case) - The Dead Cat Bounce
This stimulus seems to just be preventing the markets from slipping further. If there is no follow up from the Chinese government to give more stimulus over the weekend, we can expect any relief bounce now to turn into a dead-cat bounce for the NEXT FEW DAYS. Using the CSI300 index as an example:
Chinese Markets Tactical Gameplan
As long as price is holding below 4020.60 resistance, a short term pullback (red arrow) towards 3678.00 support is expected. This is the dead cat bounce we can expect to see. Moving averages have yet to confirm any bullish uptrend as we do not see a "MA Golden Cross" yet. Investors should not be buying into this stimulus now. If anything, they should wait for price to hold and consolidate around 3678.00 support before buying in at a discount (green arrow).
Backup Plan (Alternative Case) - The 2nd stage rally
Chinese Markets Tactical Gameplan
The stimulus is now enough to sustain the rally and both traders and investors are convinced that there is no stopping the money machine. Here, we see a straight strong 2nd stage rally above 3678.00 support and price is expected to shoot higher towards 4466.70 resistance and possibly even the next resistance at 4842.30. The strong upwards sloping MACD shows a clear build up of bullish momentum.
Conclusion:
Now that I have shared the two gameplan for you, my friends.. What are your thoughts? Some other tools that you all can consider would be:
Stay safe, trade safe my friends!
Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only. Read more
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Trader’s Edge
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