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Shanghai Composite continues to find support
5/3/2013 11:30:00 PM
By: Emerging Money
In the wake of sub-par economic numbers and earnings reports, the Shanghai Composite ( FXI , quote ) refuses to break down technically.[caption id="attachment_69730" align="alignright" width="300" caption="Shanghai sunrise"] [/caption]
Over the past two weeks, the Chinese economic figures have been less than impressive. GDP growth failed to meet investor expectations, coming in at 7.7%, slightly below most forecasts in the 8% range. Further, reports from within China indicate that corporate profits among stocks listed on the Chinese benchmark index continue to flatline , as has been the trend since 2011.
As well, a strengthening Renminbi - the currency once again hit fresh highs against the dollar - theoretically should continue to pressure the Shanghai Composite, as foreign inflows grow costlier in real terms.
In spite of these negative headlines, the Shanghai Composite continues to find support at its 200-day moving average. For the second time in the past three weeks, the exchange has rallied hard off of its 200-day moving average.
As long as the Composite holds this level, traders can stay long; a break through the 50-day average could see the Shanghai Composite test the highs from earlier this year. However, if the Shanghai Composite were to break and close below the psychologically important 200-day moving average, watch for the exchange to move substantially lower.