Medium-term technical outlook (1-3 weeks) on Country Garden (HKG 2007)
Key technical elements
- The share price of Country Garden (“H” share listed on the Hong Kong Stock Exchange), a major property developer and construction with projects that are mostly concentrated in China has plummeted by 59% since its all-time high of 19.16 recorded on 11 Jan 2018 to print a recent low of 7.85 on 24 Oct 2018).
- Country Garden has managed to stage a rebound of 29% in the past 4 weeks to record a high of 9.96 on 03 Oct 2018 reinforced by international factors; the recent dovish speech from Fed Chair Powell that stated the current policy fed funds rate “is getting closer to a neutral level” and the Trump-Xi dinner date on 01 Dec 2018 after the G20 summit that concluded with a 90-day grace period trade war truce between both sides.
- From a technical analysis perspective, the aforementioned rebound is likely no considered a bottoming process yet but rather a ‘dead cat bounce” that will resume its on-going major down move in place since Jan 2018.
- The rebound has formed a “bearish flag” ascending range consolidation where it has been accompanied by a declining volume with weak momentum where the daily RSI oscillator has flashed a bearish divergence signal a significant corresponding resistance at the 62 level.
- The key medium-term resistance now stands at 10.54 which is defined by the former range support from 03 Aug/12 Sep 2018, the upper limit of the “bearish flag” and close to the 23.6% Fibonacci retracement of the recent decline from 07 Jun 2018 high to 24 Oct 2018 low.
- The next significant support rests at the 7.33/12 as per defined by a Fibonacci projection cluster (see daily chart).
Key Levels (1 to 3 weeks)
Pivot (key resistance): 10.54
Supports: 9.40 (downside trigger), 7.33/12 & 5.55
Next resistance: 12.44
The bearish woes of Country Garden still linger despite its recent rebound of 29% from its Oct 2018 low. If the 10.54 key medium-term pivotal resistance is not surpassed and a break below 9.40 (the lower limit of the “bearish flag”) is likely to open up scope for a potential fresh impulsive downleg to target the next support at 7.33/12 and below it sees a further plunge towards the major support of 5.55 (the former swing high area of Oct 2013 & close to 76.4% Fibonacci retracement of the entire long-term secular uptrend from Oct 2008 low to its current all-time high of Jan 2018).
On the other hand, a clearance above 10.54 invalidates the bearish scenario for an extension of the corrective rebound towards the next resistance at 12.44 (swing high areas of 09 Aug/22 Aug 2018 & pull-back resistance of the former long-term ascending channel upper limit failure breakout).
Charts are from eSignal
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.