Important points
The iShares MSCI China ETF has soared this week, helped by significant economic stimulus announced in recent days to boost China’s economy. The fund’s price broke out after forming two clear lows at comparable levels on the chart from October 2022 to January of this year. Investors should monitor the level of major overhead costs around $56, $65, and $77 on the ETF’s chart, and keep an eye on the $47 area in the event of a pullback.
The iShares MSCI China ETF (MCHI) rose nearly 20% this week, helped by significant stimulus measures announced in recent days to revive China’s economy.
Chinese stocks have come under pressure in recent years due to the country’s sharp decline in real estate and weak consumer confidence, with deflationary pressures weighing on the world’s second-largest economy.
Below, we take a closer look at the ETF’s weekly chart and use technical analysis to identify key price levels to watch out for during the fund’s recent stimulus-driven move.
Possibility of double-dip
After forming two clear lows at comparable levels on the chart from October 2022 to January of this year, the MCHI ETF price broke above the multi-year downtrend line in late April. Such a formation increases the possibility of a double bottom. This is a W-shaped chart pattern that forms after an extended period of decline and indicates a possible trend reversal.
More recently, the fund came within a hair’s breadth of its acclaimed 50-week moving average (MA), before making a decisive breakout this week, posting its highest weekly volume since late January, and institutional It suggested that the house is participating in a bullish move.
The ETF rose 1.8% in mid-afternoon trading Friday to $51.01, following a 9% rise in the previous session. The fund is up 20% this week.
Key overhead chart levels to watch
Looking ahead, investors should monitor three expense levels on the ETF’s chart.
First, at around $56, the fund’s price is at the confluence of multiple peaks and troughs from May 2019 to January of last year and resistance from the downward sloping 200-week moving average.
A break above this level would confirm the double bottom pattern on the ETF chart and could push the bulls towards the $65 area. This is an area where investors may look to lock in profits near a trendline that joins comparable trading levels from late 2017 to early 2017. 2022.
In a long-term bullish uptrend, the ETF could rise as high as $77, in which case it would likely encounter selling pressure around the notable swing highs of January 2018, which could be seen in mid-2020. This is almost consistent with the series of price movements from 2021 to mid-2021.
Keep an eye on this important pullback level
During the pullback, investors should closely monitor the $47 level. This level is a position on the chart where investors who don’t want to chase a breakout may look for buying opportunities near the horizontal line connecting the May 2022 swing low and May 2024 swing high. Failure to outperform this important area could result in the fund retesting its 2024 lows.
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As of the date this article was written, the author did not own any of the securities mentioned above.
