With a very minimal involvement in these games, Li Ning Co. (HK; 2331) has all of a sudden come away as a big winner, thanks to its namesake and chairman lighting the torch at Friday's Beijing Olympics Opening Ceremony.

After rising 3.7 percent on the Hong Kong Exchange last Friday, on speculation that Li Ning could be lighting the cauldron, shares popped up again another 3.4 percent to HK$18.22 Monday, two days after the mind-boggling graceful flight around the bird's nest stadium.

About 4.4 million Li Ning shares usually trade every day. But on Friday, 9.4 million shares traded. Monday, another 9.8 million shares were traded. So what's in store for Li Ning Co.?

Li Ning enjoyed a 566 percent steady run-up from around HK$4.50 in 2005 to a peak near HK$30.00 in January 2008. The first six months of 2008 have been less spectacular.

The weekly chart shows a pile driver pattern low near HK$16.00 in March. These dips probe from the market foundation and are frequently retested. The most recent retest was in July. This rebound was capped by the resistance level near HK$20.00. The current rally has a high probability of reaching this resistance level and then retreating to retest support at HK$16.00. This bouncing up and down using the HK$16.00 support level could be part of a consolidation  pattern but broader analysis suggests it's preparing for a bear market dive.

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The chart also reveals that support levels developed during the steady 566 percent rise. The first support is located near HK$13.90. Its based on the Chinese New Year Shanghai market pullback in 2007 that made the Dow wobble. This is not a strong historical support level. A fall below HK$16.00 has a good probability of consolidating near this level, but it has a low probability of developing a trend reversal from this level.

The Guppy Multiple Moving Averages (GMMA) display relationships on the weekly chart show two bearish features. The first is the expanding degree of separation between the longer term group of averages and the short term group. This separation suggests investors are taking the opportunity to sell into any rally. This selling pressure is a bear market characteristic.

The second bearish feature is the degree of separation in the short-term blue averages. This indicates trader behavior. Traders are quick to take profits from the rebounds and this behavior turns the rebound into a rally rather than a trend change. Price must penetrate above the long-term group of averages before there is the possibility of a genuine trend change.

Our preference is to apply GMMA analysis to a daily chart. The weekly chart provides a strategic picture. The daily chart gives a tactical trading solution. We see similar relationships on both charts. The resistance level at HK$20.00 dominates the daily chart. This is above the upper level of the long-term GMMA, currently near HK$19.50. This combination of resistance features confirms the lower probability of the current rally developing into a significant trend change. Any successful move above HK$20.00 runs into another well established resistance level near HK$25.00.

Li Ning shows a classic bear position. Upside is limited by established resistance. Strong support for downside targets is significantly lower. The potential for loss following a fall below current support is much larger than the potential reward available from a rebound from support. A comfortable outcome is provided by the trading opportunities between support at HK$16.00 and resistance at HK$20.00 which give a 25 percent return.

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