China’s 50 stock index (CHI50) opened with a gap down on Monday and below the 200-day simple moving average (SMA) after posting its sharpest weekly loss in almost a year.
The bears are currently pushing efforts to close below the 38.2% Fibonacci of the upleg from 10,197 to 14,678 and although the RSI and the Stochastics are flashing oversold conditions, the short-term indicators are still pointing downwards along with the MACD, all providing negative warnings for the coming sessions. Yet, room for more downside could be limited.
In the negative scenario, selling pressure could accelerate towards the 50% Fibonacci of 12,438, while lower the psychological number of 12,000 and the 61.8% Fibonacci of 11,900 could be next gauged by the radar.
Otherwise, a jump above the 200-day SMA that currently stands near the 23.6% Fibonacci of 13,620 could bring the 14,050-14,239 resistance area back into focus. Running higher, buyers would be eagerly waiting for a closure above the 14,678 peak to increase exposure in the market as such a move could push the index towards the 2018 top of 14,914.
Meanwhile in the medium-term picture the outlook switched to neutral from bullish following the decline below the previous low of 13,478 that put the market’s uptrend into question.
Summarizing, CHI50 index is looking bearish in the short-term and neutral in the medium-term timeframe.
