Watch Out for the Head and Shoulders Patterns
If you followed my previous post about bearish patterns popping up around the market, then I've got another one for you. Check out the previous post in the link below.
Another Bearish Technical Development
When sentiment in equity marktes worldwide is turning bearish, then you will see a lot of the more bearish technical patterns showing up in the charts. Here is an example below with the Hang Seng Index. A head and shoulders of candlestick formation are appearing on the charts. This is a bearish development.
Will this head and shoulders pattern recieve confirmation through more substantial selling? Currently the price of the index is at the neck line of this head and shoulders pattern. This is a strong support level. If the price continues to drop below the neck line then this could warrant a bearish swing trade.
Will Selling Follow This Head and Shoulders
Head and shoulder patterns are not always 100% reliable. Often you will see the price bounce off of the neck line and back into an uptrend. With all of the bearish sentiment in equity markets world wide, this head and shoulders pattern seems to be legitimte so far and I would be very weary of this development if I were holding long positions.
If there was a textbook for technical patterns, then it would say that when a head and shoulders pattern is confirmed, it would imply that the price shoudl fall the same distance that is between the top of the head to the neck line. This would imply that a 17% drop in price would follow the breakdown of the neck line.
Conclusion
Personally I dont follow the textbook rules of technical patterns because they rarely follow the formula perfectly. But the most important fact to keep in mind is that this is a bearish formation and there have been many times in the past when these patterns led to significant selloffs.
With all of the bearish sentiment towards equities lately, I feel like this bearish formation might lead to more selling in chinese equities, at least in the short-term time frame. Personally, I am feeling bearish towards chinese and american at the moment.
But I should mention that in the mid-term and long-term picture, I am still bullish towards equities in general. I still believe this bull market has more legs to the upside. So I am still looking for the dip to buy, as always.
So, are you feeling bullish or bearish towards the Hang Seng Tech Index?
As always, this is not investment advice. Good luck trading. Be careful and be patient. Dont anticipate the market. Rather, participate in the market. Give your investments time. Don't be greedy. Don't invest in anything you don't understand. Don't put all of your eggs in one basket. Don't listen to the hype. Don't fomo or panic into or out of trades. Do your own due diligence. And just follow the trends. A trend is your friend.
$TENCENT (00700.HK)$ $SSE Composite Index (000001.SH)$ $CSI 300 Index (000300.SH)$ $SZSE SME 100 Index (399005.SZ)$ $FTSE Singapore Straits Time Index (.STI.SG)$ $NIO-SW (09866.HK)$ $NIO Inc. USD OV (NIO.SG)$ $NIO Inc (NIO.US)$ $BILIBILI-W (09626.HK)$ $Bilibili (BILI.US)$ $Baidu (BIDU.US)$ $BIDU-SW (09888.HK)$ $XPeng (XPEV.US)$ $Li Auto (LI.US)$ $BYD COMPANY (01211.HK)$ $BYD Company Limited (002594.SZ)$ $HSI Volatility Index (800125.HK)$ $Hang Seng Index (800000.HK)$ $Hang Seng TECH Index (800700.HK)$ $S&P/ASX 200 (.XJO.AU)$ $S&P/ASX 100 (.XTO.AU)$
$Direxion Daily CSI China Internet Index Bull 2x Shares ETF (CWEB.US)$ $China Alphadex First Trust (FCA.US)$ $Wisdomtree China Ex-State-Owned Enterprises Fund (CXSE.US)$ $S&P Asia 50 Index Ishares (AIA.US)$ $KRANESHARES SSE STAR MARKET 50 INDEX ETF (KSTR.US)$ $RAYLIANT QUANTAMENTAL CHINA EQUITY ETF (RAYC.US)$ $iShares China Large-Cap ETF (FXI.US)$ $Xtrackers Harvest CSI 300 China A-Shares ETF (ASHR.US)$ $Franklin Templeton Etf Tr Ftse China Etf (FLCH.US)$ $db X-trackers Harvest CSI 500 China A-Shares Small Cap Fund (ASHS.US)$ $iShares MSCI China ETF (MCHI.US)$ $KraneShares CSI China Internet ETF (KWEB.US)$ $KRANESHARES CICC CHINA 5G AND SEMICONDUCTOR INDEX ETF (KFVG.US)$ $Global X Funds Global X Msci China Consumer Staples Etf (CHIS.US)$ $Global X FinTech Thematic ETF (FINX.US)$ $Global X MSCI China Industrials ETF (CHII.US)$ $Global X MSCI China Energy ETF (CHIE.US)$
$Invesco QQQ Trust (QQQ.US)$ $iShares Russell 2000 ETF (IWM.US)$ $VIX Index Futures(JAN5) (VXmain.US)$ $SPDR S&P 500 ETF (SPY.US)$ $SPDR Dow Jones Industrial Average Trust (DIA.US)$ $iShares MSCI Emerging Markets ETF (EEM.US)$ $Gold Futures(FEB5) (GCmain.US)$ $E-mini Dow Futures(MAR5) (YMmain.US)$ $E-mini S&P 500 Futures(MAR5) (ESmain.US)$ $E-mini NASDAQ 100 Futures(MAR5) (NQmain.US)$ $E-mini S&P MidCap 400 Futures(MAR5) (EMDmain.US)$ $E-mini Russell 2000 Index Futures(MAR5) (RTYmain.US)$ $CBOE Volatility S&P 500 Index (.VIX.US)$ $VIX Index Futures(JAN5) (VXmain.US)$
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102640653 : How long do u think the China market sell off will last . Look to me a bottom has been place around 17620-17650 zone . Will it hold. I don’t know. But it is dangerous here to play around without any knowledge of technical indicators. What u thinks. Thanks for feedback.
102640653 : The sse composite index have a gap at 3085-3089 zone . Look like it will fill it up today . Will this hold or move down further is anyone guess. Fingers crossed I’m betting that it will hold n eventually China markets may just start to run up as soon as possible. It’s been long accumulation going on for past few months n it’s ripe time. Following heavyweight n most r either at their support or near the Low. Indicators showing oversold for some already but in bear market it may overextend. Now it’s just a valuation call . U find it cheap hold it n keep it . It’s a treasure u r finding at these level. Goodluck friend. Your views n further technical on Alibaba . It hit hkd 82.5 . There is a gap in usd at around 83 level which should fill today .
102640653 : There is a posing gap now on sse 3085-3086 zone
102640653 : If it fills I will be confident. Many people don’t follow gap theory . But I do .
102640653 : 25th august high was 3085.05 n low on 28th august was 3089.12 on sse . It really came back to test the gap after about 3 weeks which surprised me . I’m not good but I’ve come to know from a trader that it’s always safe to buy when the gaps r filled it will be much cheaper price u r going to pay
102640653 : Just look at intraday 1 min chart it hit 3086.2 n the next minute u see the pump up. I will call it man made manipulation. This is where a lot of Chinese funds were waiting on sidelines to purchase up stocks . Just a thought . Any view. Friend
MonkeyGee : I think this is the longest China market down trend! TA says it's time to buy but don't see any positive news at all.
102640653 : Friend yesterday was a buying day in Chinese market. First of all the gap filled n most stocks were at low level n support level . There was big volume snap up stocks at low level yesterday. Hopefully the gap theory works. Good luck. Can u just look at the technical for sse , hangseng n Alibaba. Thanks friend .
102640653 : Appreciate
SpyderCall OP 102640653 : It looks like that base will hold so far. The price is rebounding off of the lows made a month ago. There is a slight bullish divergence, so the very short-term picture might see some more buying. But I'm not sure how long the buying will last. Everything feels bearish right now.....
Nice open so far. I hope things dont turn around.
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