China A50 Index and CITIC Securities (6030.HK) Remain Ranging Above The Key Support Levels

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Last week, China's Beige Book stated that the Chinese economy contracted for the second consecutive quarter in the three months to June, pointing to a technical recession. Meanwhile, analysts are expecting the Chinese central bank to lower the reserve requirement ratio (RRR). A Bloomberg's survey showed that economists forecast a 50 basis points cut in RRR in the third quarter, following by another 50 basis points in the first quarter of 2021.

Charts (6)

Last week, China's Beige Book stated that the Chinese economy contracted for the second consecutive quarter in the three months to June, pointing to a technical recession. Meanwhile, analysts are expecting the Chinese central bank to lower the reserve requirement ratio (RRR). A Bloomberg's survey showed that economists forecast a 50 basis points cut in RRR in the third quarter, following by another 50 basis points in the first quarter of 2021.

Investors should focus on the official manufacturing PMI (50.5 expected) and non-manufacturing PMI (53.6 expected) on Tuesday. In addition, Caixin Manufacturing PMI (50.6 expected) will release on Wednesday, while Services PMI (53.0 expected) will come on Friday.

Technically, China A50 Index is trading within the consolidation zone between 13980 and 13480 after breaking above the declining trend line drawn from January top.

Currently, the index prices are supported by a rising trend line drawn from April and both rising 20-day and 50-day moving averages. In addition, the process of higher tops and higher bottoms remains intact. Both technical configuration would suggest a bullish outlook.

A break above the upper consolidation zone at 13980 should enhance the bullish outlook and would bring a rise to the resistance levels at 14260 (the high of March) and 14700 (the high of January).

However, a break below the support level at 13480 (the low of June 11 and 12) would erase the bullish outlook and trigger a return to 13015 (the low of May 25).


Source: GAIN Capital, TradingView

From a technical point of view, China CITIC Securities (6030-hk) remains on the upside as shown on the daily chart. It has formed a double-bottom pattern and has broken above a symmetrical triangle. The level at $13.90 might be considered as the nearest support, with prices likely to test the 1st and 2nd resistance at $16.10 and $17.00 respectively. 

Alternatively, losing $13.90 would suggest that the next support at $13.06 might be exposed.


Source: GAIN Capital, TradingView

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