China Evergrande (3333-hk): Sell on Rumors

China Evergrande had exceeded our bullish forecast made in early June. However, its share price has retreated sharply afterwards, amid downbeat first half results and negative rumors.

Downtrend 1

China Evergrande (3333-hk), a top tier Chinese property group, had exceeded our bullish forecast made in early June after surging to a 15-month high in July. However, its share price has retreated sharply, amid downbeat first half results and negative rumors.


In September, the company announced a staggering 30% discount on all of its properties until early October, a period that is supposed to be traditional Chinese peak home-buying season, as an attempt to improve its cash flow.


Furthermore, the property giant may face a potential default as it may need to repay investors 19 billion dollars by January 2021, unless regulators approve its listing on the Shenzhen stock exchange, according to Bloomberg.


From a technical point of view, China Evergrande (3333-hk) remains under pressure as shown on a daily chart. Despite the fact that it has just shown a bullish divergence, it remains trading within a bearish channel drawn from July. The upside potentially is likely to be limited by the upper boundary of the channel. The level at $18.10 might be considered as the nearest resistance, with prices likely to test the 1st and 2nd support at $14.10 and $12.38. Alternatively, a break above $18.10 might suggest a further rebound to test the next resistance at $20.20.



Sources: Gain Capital, TradingView

More from Stocks

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

GAIN Capital UK Limited (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.