- Gold Will Collapse Like Oil Did in 2008: Charts
- Dollar Rebound? Wait At Least Another 10 Months
- $1,160 is Gold's Next Target Level: Charts
- Why Nikkei Won't Top 10,500 in Near Term
- MSFT Stock Rise Has Little to Do with Windows 7
- What Now for Dow? Look to China for Clues
- How Far will Asia Go? Look to Kospi, Not Dow
- Betting on Aussie Parity With Dollar? Don't Hold Your Breath
- Profiting from Kraft's Takeover Bid for Cadbury: Charts
MOST SHARED
- Wednesday's Economic News Crunch Could Tilt Markets
- The 'Real' Jobless Rate: 17.5% Of Workers Are Unemployed
- Obama Reiterates Commitment to Boost US-India Ties
- NBA D-League On The Rise
- The Social Media Gaming Threat
- Australia Wheat Exporters Face Challenges: GrainCorp
- Japan Export Rebound Eases Fear of New Recession
- Stifling Anger at Work Can Kill, Survey Finds
- Citi Mortgage Reveals What Treasury Won't
- S&P to Hit 1,200 by Year-End: Chief Investor
- Amended Berkshire Hathaway Filing Indicates No Secret Stock Stakes at End of Q3
- Facebook's Biggest-Ever Holiday Shopping Season
- Facebook's New Dual Class Structure - Slow Steps to an IPO
- 5 Big Bank Stocks Investors Should Consider: Strategists
- Gambling Drunk, Texting to Live And America's On Sale - Your Emails
- Nov. 24: Unusual Volume Leaders
- NBA D-League On The Rise
- Americans Ditch Planes for Trains this Thanksgiving
- AIG Board OKs CEO Pay; Benmosche Agrees to Stay
- Half of Banks' Losses May Still Be Hidden: IMF Head
- Obama Reiterates Commitment to Boost US-India Ties
- FDIC's Bair Cautions on Risks in Bank Break-Up Plan
- Wednesday's Economic News Crunch Could Tilt Markets
- Call Me Crazy: Confessions of a Black Friday Shopper
- Turkey Day 101: How Well Do You Know Your Bird?
- Citi Mortgage Reveals Something the US Treasury Won't
RSS FEED
Charting Asia
Text Size 
Starting September 2008 the Shanghai Composite Index has been steadily rising, a remarkable performance in this dismal environment.
First, the SCI stopped falling – a feat which Western markets have yet to emulate. Secondly, it's developed a consistent sideways trading pattern which is a signal of consolidation. The Shanghai market is entering the Year of the Ox, and it may well be the start of a bull year.
 |
CLICK CHART TO SEE IT IN FULL SIZE |
The SCI continues its slow sideways activity between the lower and upper edges of the trading band. This is excellent consolidation behavior. This consolidation pattern is a good indication that the large market falls have ended.
The consolidation pattern may continue for another two or three months before there is a successful breakout and the development of a new trend. This is developing the L-shape pattern of market recovery.
This consolidation pattern started with the low on September 18, 2008. The lower edge of the consolidation pattern is the development of the support area in the narrow trading band between 1,685 and 1,750.
The upper edge of the consolidation pattern is the development of the resistance area in a narrow trading band between 2,000 and 2,100. The upper edge of the consolidation band has been tested four times starting November 2007. There has not been a successful breakout above 2,100 and this indicates the resistance strength is significant.
One important feature of the sideways pattern is the developing bullish bias. The upper level of resistance has been tested four times. The lower level of support has been strongly tested once. The retreats from the resistance level have moved towards the narrow support band area but the market has rallied before support was reached. This shows a developing bullish bias.
This bullish outlook is confirmed by the development of a consolidation and accumulation pattern. The accumulation phase is when buyers enter the market. They accumulate securities that have been falling because they believe the trend will soon change. Accumulation shows early buying in the market as investors buy shares from shareholders who have lost faith in the company. The volume of trading activity rises as the market rally develops, shown at points A, B and C. Accumulation is seen in long term chart patterns, including the L-pattern in the current market.
More From CNBC.com
- China May Be Top World Economy in 20 Years: Rogers
- Investing in the Year of the Ox
- India, China Are Good Long-Term Opportunities
- The Future of China-US Relations
The target for the breakout from the consolidation pattern can be calculated. The width of the trading consolidation band is measured and projected upwards. If the full width of the band is used, from 1,685 to 2,100, then the breakout target is near 2,600. If the inside width of the trading consolidation band is used, from 1,750 to 2,000, then the breakout target is near 2,300.
The sideways consolidation and accumulation pattern has continued for five months. The pattern may continue for another two or three months. It takes many months for a market to recover from extreme losses. At the start of the Chinese New Year the Shanghai market is the most bullish of any world market.
If you would like Daryl to chart a specific stock, commodity or currency, please write to us at . We welcome all questions, comments and requests.
CNBC assumes no responsibility for any losses, damages or liability whatsoever suffered or incurred by any person, resulting from or attributable to the use of the information published on this site. User is using this information at his/her sole risk.
- Remember when auto shows were major events where new models could generate buzz?
- CNBC’s Mike Huckman visits a cutting-edge plant to see how the flu vaccine of the future is being made.
- People who bottle up their anger at work are up to five times more likely to suffer a heart attack, a study found.
- Playboy will outsource its publishing operations in a bid to become profitable again.
- A new McDonald's in Manhattan is the nation's first to sport a sleek, chic interior imported from stores in London and Paris.
- For nearly three decades, these on-call experts have been dishing advice on how to – and not to – cook turkey.
Data is a real-time snapshot *Data is delayed at least 15 minutes