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Friday, September 23, 2011

Stock Index Chart Patterns – Shanghai Composite, Korea KOSPI, Taiwan TSEC – Sep 23 ‘11

Shanghai Composite Index Chart
 
In my previous update of the stock chart pattern of the Shanghai Composite index, I had mentioned that the Aug 9 '11 low of 2438 may be tested and broken soon.  The index managed to stay above its previous low for almost 3 weeks before the inevitable happened. On Tue. Sep 20 '11, the index touched a new low of 2427. In today's trade, the index dropped lower to 2400, before closing at 2433. 
The bearish pattern of lower tops and lower bottoms continues unabated, with all efforts at up moves facing resistance from the falling 20 day EMA. Three of the four technical indicators are looking bearish - the slow stochastic is in its oversold zone, and the ROC and MACD are negative. The RSI has bounced up from its oversold zone, but is below its 50% level. The bears are regaining their stranglehold on the Shanghai Composite chart.
Korea KOSPI Index Chart
After the sharp fall in Aug '11, the KOSPI index had been showing a lot of resilience, with occasional forays above the 20 day EMA. But after 6 weeks of sideways consolidation, the Aug 9 '11 low of 1685 is under serious threat of being broken. The index dropped almost 6% in today's trade to close just below the 1700 level.
The technical indicators are weakening. The slow stochastic is below the 50% level. The ROC is sliding into negative territory. The MACD is above its signal line, but is still negative. The RSI is resting on the 50% level, but likely to drop below. Lower levels are likely in the coming week.
Taiwan TSEC Index Chart
Like the KOSPI, the Taiwan TSEC chart was trying to keep the bears at bay and managed to stay above its Aug 9 '11 low of 7149. Today's 250 points drop put paid to the last of the bullish hopes. The index briefly breached the 7000 level before regaining about 50 points from its intra-day low.
The technical indicators are bearish. The slow stochastic and the RSI are both below their 50% levels. The ROC and MACD are both in negative territory. Looks like the bulls are ready to throw in the towel against the bear onslaught.
Bottomline? The chart patterns of the Shanghai Composite, Korea KOSPI and Taiwan TSEC indices clearly indicate that the bears have regained the upper hand. All three indices are likely to seek much lower levels. But this isn't the right time for bottom fishing. Wait for the selling rush to play out. Buying can be considered after bottom formations become evident. 

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