China: should investors buy this dip?

TL;DR

Despite negative news, a contrarian play suggests a resumption of the uptrend in Chinese shares, while the FTSE 100 remains neutral and Tesla experiences a potential breakaway gap.

Transcript

good morning it's john burford with chart of the week for monday the 15th of november and i'm covering the far east in the guise of china now china share chinese shares have been totally out of favor in the last few weeks and months all the news pretty much has been negative from the uh crackdown on the tech sector and the internet to the crash or ... Read More

Key Insights

• 😀 Chinese shares have faced negative news but present a contrarian opportunity for a resumption of the uptrend.
• 😐 The FTSE 100 has surpassed a resistance level, causing a shift in stance from bearish to neutral.
• 🛀 Tesla shows potential downside movement with a breakaway gap and a potential decline to Fibonacci levels.
• ❓ Government crackdowns and the Evergrande crisis have influenced sentiment in Chinese shares.
• 🍰 Short-selling hedge funds may be forced to cover their positions in Chinese shares, leading to a short squeeze and higher share prices.
• 🎚️ The FTSE 100 may find solid support at previous resistance levels.
• ⌚ The all-time high for the FTSE 100 in 2018 may be a significant level to watch for.

Questions & Answers

Q: Why have Chinese shares been out of favor recently?

Chinese shares have faced negative sentiment due to government crackdowns on the tech sector and the property sector, particularly with the Evergrande crisis.

Q: What is a contrarian play, and why does it suggest a resumption of the uptrend in Chinese shares?

A contrarian play involves taking a position opposite to the prevailing market sentiment. In this case, with sentiment at a low ebb, the contrarian play suggests that Chinese shares are ready to advance strongly.

Q: What caused the shift in stance from bearish to neutral in the FTSE 100 analysis?

The FTSE 100 has pushed above the 7200 resistance level, which had previously acted as a line in the sand for the bearish stance, leading to a change in stance to a neutral one.

Q: What is a breakaway gap, and why is it significant in the analysis of Tesla?

A breakaway gap occurs when a strong rally is followed by a gap opening that remains unfilled for a significant period. In the case of Tesla, the breakaway gap suggests potential downside movement and a decline to Fibonacci levels.

Summary & Key Takeaways

• Chinese shares have experienced a negative sentiment due to crackdowns on the tech sector and property sector, but a contrarian play suggests a resumption of the uptrend.

• The FTSE 100 has surpassed the 7200 resistance level, causing a shift from a bearish stance to a neutral one, with the possibility of a test of the support level.

• Tesla shows potential with a breakaway gap, indicating a strong rally followed by a gap opening that hasn't been filled, and a potential decline to Fibonacci levels.