Now is the next best time to invest in Chinese market!
After a consolidation phase and stimulus measures for the Chinese economy, the Chinese Composite Index is moving back up. This recent rise presents opportunities for investors who want to enter strategically. Ample reason to explore the most promising zones and see how to take full advantage.
1. Monthly chart: Your long-term compass
To identify important turning points, look at the monthly chart and work with a High-Low chart. This makes it easy to see where multiple tops and bottoms coincide. Breakthroughs of key levels, such as 3700 and later 4000, mark the beginning of a new upward cycle.
This image shows Shanghai Chinese Composite Stock Chart with key levels.
Since 2016, the index has been moving sideways within a range of 2600 to 3700 points. Trend lines clearly indicate where support and resistance are located. Both trend lines approach zones simultaneously, raising the importance of support and resistance. A break above 3700 opens the door to further growth, with 4000 as the next target.
2. Weekly chart:Precise analysis for better timing
This image shows Shanghai Chinese Composite Stock Chart in weekly timeframe.
On the weekly chart, refine your analysis by using a candle chart. This offers more precision for short-term moves. Keep an eye on key zones such as 2600, 3100, 3400 and 3700. They act as strong support and resistance levels.
3. Daily chart: Thorough analysis of the current movement
This image shows Shanghai Chinese Composite Stock Chart in daily timeframe.
The daily chart shows powerful signals!
- Falling trend line broken
Connecting the tops of December 2021 (A) and May 2023 (B), you notice a falling trend line. This line was recently broken (D).
Point (D) marks the beginning of a new trend and is therefore an interesting entry point. - Gap/window: a powerful bullish signal
At the moment of the breakout in point D, you can see a price jump above both the falling trend line and the top of point C. This indicates a strong upward impulse. - Fibonacci levels
The horizontal purple lines are the Fibonacci retracements, measured from the bottom to the highest price. The index found support around the 50% level of the Fibonacci retracements. As long as the price remains above the 61.8% level, the upward trend remains intact. - Cluster: The crucial zone
All these factors point to one key zone: 3050/3100 points. As long as the index remains above this zone, hold positions. This confirms the positive trend toward 3700 and 4000. Once below it for several days is negative. It is then best to close your position until a new breakout manifests itself.
How to enter?
The upward cycle has begun, with price targets of 3700 and 4000 in sight and a stop around the cluster level. Entering with an ETF offers easier management, broader exposure and is more convenient to close below the cluster level. If the trend is set and security is greater, then a move to individual stocks is possible.
Now follow some interesting options:
US listing:
- iShares FTSE China 25 Index Fund (FXI) – This ETF tracks 50 of China’s largest companies, focusing on consumer goods, financials and communications.
- Kraneshares CSI China Internet ETF (KWEB) – Invests in Chinese Internet and technology companies, including Meituan, Alibaba and Tencent.
- iShares MSCI China Index Fund (MCHI) – This ETF includes more than 600 large and mid-sized Chinese companies.
EU listing (counterparts of the US listing):
- iShares FTSE China 25 (IE00B02KXK85)
- Kraneshares CSI China Internet UCITS ETF (IE00BFXR7900)
- HSBC MSCI China ETF (IE00B44T3H88)
Conclusion
- After this 3-step exploration on a monthly, weekly and daily basis, you will better estimate how to take advantage of the opportunities presented by the growing Chinese economy;
- You take into account the high volatility of the Chinese stock market;
- The ETFs you trade are based on estimates of the previous and next trading day. So this requires both patience and strategy.
As an old Chinese saying goes, “The best time to plant a tree was twenty years ago. The second best time is now.” As in investing, it’s all about patience and choosing the right time….
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