Upon the request from friend, I make following analysis on Shanghai composite index. This big index enjoyed several big swings within last 12 years. This kind of swig usually behaves like a pendulum. Let's take a look the monthly charts. The index topped out in last 2007 around 6124.04, then it takes about 6 and half years to consolidate, finally relaunch in early 2014. The recent top happened at the middle of 2015, then the correction started almost the same pattern like top out in 2007. Right now, it runs within a big wedge. How long it will take to finish the correction: 6 and half year? It is hard to predict. But I believe the market will hit the lower bound of the big wedge, then relaunch again. If the lower bound of big wedge is broken down, it is really a big big bear market which I think is a low probability outcome. Regard to the short term direction and trend, I have to look at the weekly or daily chart to derive some clues.
By examining the weekly chart, it is relatively easy to derive the potential short term bottom: it should be 50 weeks moving average since this MA acted multiple times resistance in late 2015. The bounce will happen around 50 weeks MA. In case 50 weeks MA does not hold, the 200 weeks will still act as strong support since this MA acted as supports twice in early 2016. If this 200 weeks MA not hold, next target will be the lower bound of the big wedge showed in monthly chart.
In summary, except this index can reclaim EMA 13 days around 3134, the downside to come is most high probability outcome. 50 weeks, 200 weeks 2 important levels to watch. The final bottom to keep the bull hope is the lower bound of big wedge on monthly chart. Let's still keep the bull hope.
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