Thursday, July 9, 2015
Shanghai Readies for an Additional 22% Advance
Last night the Shanghai Index formed a bullish engulfing pattern in its advance of 8% from the opening level. Additionally, the index registered a 13th new session low without a 3 session pause, indicating extreme oversold conditions. Finally, the Shanghai tested the 200 day moving average, opening at that average today and trading to a low at that average yesterday. The index having fallen 34% from the mid-June high appears ready to make additional recoveries of those losses in the coming days and weeks.
The latest in a series of bearish windows opened when prices gapped lower from Tuesday’s close to Wednesday’s open. That window was closed yesterday and accordingly, we should now recognize that window area as support. There will be a drive to close the next window above to 4528, offering an objective of an additional 22% upside. We should anticipate that there will be better resistance toward the next higher window at 4785 an of course at the historic high which was marked by a bearish engulfing.