China's stock market has been nothing short of a roller-coaster ride this year.
The Shanghai composite rallied more than 60 percent from January to its mid-June high, then took a sharp turn lower, losing more than 23 percent of its value in the past 30 trading sessions. Since hitting a low of 3,507 last week, the index has bounced 13 percent. And while that volatility has some investors drawing parallels to the Nasdaq collapse in 2000, one top technician says the better analogy might be the Dow in 1929.
"We are seeing some similarities to what we had seen in the Dow where you had a very parabolic advance and then a sharp correction, followed by a relief rally and then ultimately there was a parabolic decline even further," technical analyst Craig Johnson said Friday on CNBC's "Trading Nation."
The Shanghai composite has shown some signs of life in the past week, rebounding nearly 8 percent for the five trading sessions. But according to Johnson, senior technical research analyst at Piper Jaffray, this kind of chart behavior is dangerous. "Traders are watching this relief rally here to see how far this is going to follow through. But those who have studied charts and looked at charts for a long time know that parabolic advances typically end poorly," he said. "Typically you get a 110 percent retracement of the entire advance up."