China "H" Share Focus: Is the worst over for Bank of China?

Bank Of China (HKG:3988) has formed several positive elements at its key 4.11/4.05 medium-term support zone.

Medium-term technical outlook (1-3months) on Bank of China (HKG: 3988)



Key technical elements

  • The recent 18% decline seen in the share price of Bank of China (H) from its 4.96 high printed on 29 Jan 2018 is the worst down move since Feb 2016 low (the start of its medium-term up trend).
  • Despite the aforementioned decline seen in Bank of China, its medium-term uptrend remains intact as it continues to trade above an ascending trendline in place since 24 Jun 2016 low (highlighted in light green) (see daily chart).
  • The recent 18% decline has stalled right at a significant medium-term support zone of 4.11/4.05 which is defined by the former range resistance from 15 Feb/27 Oct 2017 and the 76.4% Fibonacci retracement of the recent steep rally from 12 Dec 2017 low to 29 Jan 2018 high.
  • Also, several positive signals have surfaced at the 4.11/4.05 support zone. Its share price has formed a daily bullish reversal “Hammer” candlestick pattern on 09 Feb 2018 coupled with a rebound seen on is daily RSI oscillator at its oversold region. These observations suggest that the downside momentum of the recent plunge has abated and the share price of Bank of China may resume its impulsive upleg phase within its on-going medium-term uptrend.

Key levels (1 to 3 months)

Pivot (key support): 4.05

Resistances: 4.57 & 4.96

Next supports: 3.30 & 3.30 (key long-term pivotal support)

Conclusion

Therefore as long as the 4.05 key medium-term pivotal support holds, Bank of China is likely to stage a further potential up move to retest its intermediate resistance of 4.57 (former minor swing low area 31 Jan 2018) follow by the recent medium-term swing high of 4.96 in the first step.

However, failure to hold above 4.05 should damage its medium-term uptrend for a deeper corrective decline towards the next support at 3.60 and below opens up scope for a test on the 3.30 key long-term support (the primary ascending channel support from Oct 2008 low & close to the 76.4% Fibonacci retracement of the entire up move from Feb 2016 low to 29 Jan 2018 high).

Charts are from eSignal


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