A50 Index (Short term): Focus on the Declining Trend Line

The A50 Index has rebounded around 13% from the March on the hope of economic recovery after the COVID-19 outbreak....


The A50 Index has rebounded around 13% from the March on the hope of economic recovery after the COVID-19 outbreak.

Last week, China's CPI grew 3.3% on year in April, worse than the expectation of the increase of 3.7%, compared with the growth of4.3% in March, according to the government. In the below chart, the growth of CPI is slower since February, but has not reversed up.

Source: Trading Economic

On the other hand, China's industrial production rose 3.9% on year in April, better than the expectation of an increase of +1.5%. In the below chart, the industrial production data has reversed up since March and returned to the positive in recent data. It indicates that the industrial activities are recovering in China.

Source: Trading Economic

On a daily chart, the index prices remain capped by a declining trend line drawn from January top, indicating a bearish outlook. However, the index stays above both rising 20-day and 50-days moving averages, which suggests a positive bias. As the technical views are mixed, it is better to stay at neutral bias.

On the upside, only a break above 13720 (the high of May 11) would validate a bullish breakout of declining trend line and call for a rise to the resistance level at 14250 (the high of March).

On the downside, a break below the previous low at 12800 would violate the higher tops and higher bottoms pattern and bring a return to 12390 (the low of April).

Source: GainCapital, TradingView

Build your confidence risk free

More from A50

Join our live webinars for the latest analysis and trading ideas. Register now

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.