China "H" Stock Focus: Bottoming formation sighted in PetroChina

"Bottoming" configuration sighted in PetroChina, the worst may be over.

Medium-term technical outlook (1-3months) on PetroChina (0857 HKG)



Key technical elements

  • Since hitting a major low of 4.16 in Jan 2016 (coincided with the 4.06 low printed in Oct 2008/Great Financial Crisis), PetroChina has traded in a sideways configuration below 6.60 (see weekly chart).
  • After takin into account of recent price action since Mar 2018 swing low area of 5.21/18, the stock has started to trace out a medium-term bullish reversal “Double Bottom” configuration. In addition, the recent up move in price action from the 5.21/18 low of Mar 2018 has been accompanied by an increasing volume (see weekly chart).
  • The daily RSI oscillator has continued to inch upwards and it still has room to manoeuvre to the upside before it reaches an extreme overbought level of 84%. These observations suggest that medium-term upside momentum of price action remains intact.
  • The key medium-term support rests at 5.18 which is defined by the ascending trendline from Jan 2016 and the Mar 2018 swing low area (see daily chart).
  •  The significant medium-term resistances stand at 6.60 (neckline of the “Double Bottom”), 7.40 (swing high area of 10/11 Aug 2015 and 7.92/8.08 (former minor swing low area of Nov/Dec 2014 & 1.382 Fibonacci projection of the up move from 20 Jan 2016 low to 18 Jan 2017 high projected from 10 Jul 2017 low).

Key levels (1 to 3 months)

Intermediate support: 5.66

Pivot (key support): 5.18

Resistances: 6.60, 7.40 & 7.92/8.08

Next support: 4.15 (key long-term pivotal support)

Conclusion

Therefore as long as the 5.18 key medium-term pivotal support holds, PetroChina is likely to shape an initial potential push up to test 6.60 in the first step. A break above 6.60 opens up scope for a multi-month up move to target 7.40 follow by 7.92/8.08 next.

On the flipside, a break below 5.18 jeopardises the bulls for a choppy decline to retest the 4.15 key long-term/major pivotal support.

Charts are from eSignal



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