Thursday, January 7, 2016

Shanghai market crashes another 7%. What to expect next?

Chinese Equity Market Shanghai Composite is in limelight from last few months now. We can see that volatility in Global Equity Markets has increased due to the slowdown and growth issue in China. On 4th January 2015 Shanghai tumbled 6.9% on back of growth issues. In fact even today there was severe selloff witnessed where market fell by more than 7% which has led to suspension of trading for today. This has been keeping Global Equity Markets on the edge. It is important to understand the overall structure of Shanghai Composite.

In order to know where Shanghai will head itself and what are the crucial levels subscribe to “The Financial Waves Monthly Update” which covers in-depth research on various asset class viz Global market, Nifty, Bank Nifty Currency, Commodity and Mutual funds. Below is the part of the research:

Figure 11: Shanghai Composite weekly chart

As shown in weekly chart, an important top for this market was placed in the year of November 2007 as post that prices showed sharp reversals on downside and flashed its red signals. However 2014 proved to be a year of revival as prices managed to move higher in an impulse fashion which helped the market to head towards the highs of 5178 levels. Looking at the current scenario, prices are showing retracement of the prior up move which started from the lows of 2100 to the highs of 5178. This has surely put a halt to the upside move but one needs to understand that correction do happen in any particular asset and post its completion we might again see the resumption of the ongoing trend.

Case in point: There was no such optimism seen when market showed decent rally from the lows of 2100 to the highs of 5170 which means more than 100% of appreciation in terms of price. Whereas the recent down move has put in too much of pessimism in the mind of people even when Chinese market has protected its lows made in August 2015. For objectively understanding the trend we use Elliott wave technique.

As per Elliott wave perspective, prices completed bigger degree wave III near the highs of 6124 and post that showed 7 years of correction in the form of (A)-(B)-(C).  Wave (C) formed Ending diagonal pattern and post its completion there was sharp reversals seen on upside. This rising segment indicates that cycle degree wave …….. completed its course in mid 2014 and next leg has taken its place in the form of wave ……

Spikes are very important as it forms important highs and lows and break of the same can result into trending move on either side. Such spike was witnessed in this index during August 2015 where prices made a crucial low of …….levels. So as long as this level is protected we can continue to expect range bound action and on upside break above ……. will give us the confirmation that medium term uptrend is resuming again.

In a nutshell, ………….

To know what is next from here in Global markets along with detailed medium term outlook on Nifty and Bank Nifty subscribe to “The Financial waves Monthly update”. Also get access to daily short term research report – “The Financial waves short term update” which covers Nifty and stock on daily basis. It is during such volatile environment objective way of research is most important. Do not miss out on this strong trending move and find out crucial support or resistance levels from Trading to Investment perspective. For subscription options visit the Pricing Page.

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