Charting China with FXI – The Boom and Bust

Aug 31, 2015: 11:18 AM CST

We’ve seen so many headlines recently about China, its economy, and how it pulled down the stock market last week.

Let’s step back and chart China with the ETF symbol FXI to see what’s happened and what’s important now.

2015 has been a volatile year for the Chinese stock market, as seen with the tradable ETF FXI.

First, the fund had a strong bullish gap and breakout – on higher volume – going into April.

Price surged from the $43.00 level straight up toward $52.00 which was – so far – the high of the year.

At that point, price retraced lower, then later broke the support of the 50 day EMA into the $48.00 zone.

From there, the selling intensified on very high volume – up to 100 million shares in a day – in July.

That was the first “crash” or collapse of the ETF from $50.00 to $39.00 in about a week.

From there, price stabilized at the $40.00 level before crashing again, this time on lower volume in August.

This “August Crash” is credited for sending the US Stock Market rapidly lower.I also highlighted what happened during the July ‘crash’ which is happening again during this August move.

Shares bounce strongly higher back into the underside of the falling 20 day EMA.

Let’s actually broaden our perspective to the Weekly Chart to pinpoint the key levels at play now:

Going back in time, we see the FXI fund created a triple support shelf at the $32.00 per share level.

Resistance was less defined, as it stretched from $40.00 to $42.00 per share.

Finally, the fund broke strongly higher in early 2015, overheating above $52.00 per share.

The result was just a “Return to Earth” from a Rocket Arc Pattern – a V-Spike Reversal at the highs.

Speaking of the Rocket Arc, be sure to review my post from China’s FXI Rocket Arc as it occurred.

Price collapsed down from $52.00 toward the $32.00 key support pivot which is where we trade now.

Note the higher frame reference levels, the multi-year balance range ($32.00 to $42.00) and the current movement up off the $32.00 level.

If shares fail to bounce and suddenly break under $32.00, it would indeed shift the chart and expectations toward even more selling pressure under $32.00.

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Corey Rosenbloom, CMT
Afraid to Trade.com

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2 Comments

2 Responses to “Charting China with FXI – The Boom and Bust”

  1. Volatility High for Chinese Stock Market Says:

    […] By Corey Rosenbloom […]

  2. Yaspal Says:

    It’s unbelievable drop, it’s not something I feel is going to stop there, so we are required to be very careful with how we deal with things, it’s important to do proper analysis before entering the market, it’s too risky to be going like that. I am lucky to have OctaFX broker, it provides me perfect opportunity with cTrader platform where I get advance charts plus upgraded system, so I can do analysis really perfectly and that leads to terrific results.