Shanghai A share 2018 2H Outlook -technical analysis (July 31 2018)

Shanghai A share 2018 second half outlook

Review on 2017 forecast

For the year 2017 we have employed 2 possible model for Shanghai A share index : bullish and bearish and the corresponding strategy for trading :

Bullish Model

(Strategy – Long at 3249, target 3690-3790 and stop loss at 3108)

Bearish model

(Strategy – Short if index drop below 3108, target 2360 and stop at 3456)

The Shanghai A share index follow the first bullish model. It reach the projected PRZ 3690-3790 (Price Reversal Zone) at 3757 on 29-Jan-2018. After that a reversal took place with strong bearish strike to the south side.

At the moment of end May 2018, the index was closed around 3220. And whats’s next ?

What’s next in 2ndhalf for 2018

The mini-crash after 29-Jan-2018 was fierce with power (lost 550 points in 2weeks time, from 3759 to 3207).  It was likely to be the first bear leg of the index.

The index then side walk to down for a few months (consolidation pattern) and it is highly possible that the second bear leg has started to run from mid March 2018, after rebounded to near 3490 (~>50% retracement)

With harmonic analysis, we may find a possible bullish deep crab pattern which end the current bear leg at 2750-2800 :

(Day chart of Shanghai A share index as on 31 May 2018)

In the chart, XABCD is the possible bullish deep crab pattern running at the moment, where AB is the previous bearish thrust since 29-Jan-2018. The rebound to 3491 at mid-March 2018 denote the BC part of the pattern and the 2ndbear leg (CD in the chart) was likely to be running in the middle and can be confirmed once the point X (3195) support was broken down.

If X were broken down, we will expect the end of the 2ndbearish leg may end at the projected PRZ at 2750-2800 (projected standard D point around 2800), at which we will expect at least some sizable rebound. We may look for a long opportunity after the PRZ is reached then.

(source: LY, July 14 2018)

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