Featured Trade (HK Stock/H share): Bank of China vulnerable for a major bearish breakdown
Kelvin Wong October 11, 2018 10:27 AM
Bank Of China is eyeing a potential bearish breakdown from its major support
Medium-term technical outlook (1-3 weeks) on Bank of China (HKG 3988)
Key technical elements
- The share price of Bank of China (“H” share listed on the Hong Kong Stock Exchange) has plummeted by 35% YTD from its 29 Jan 2018 high of 4.96 which make it one of the worst performing banking stocks in 2018 where the benchmark KBW Nasdaq Global Bank Index recorded a YTD decline of -16.45%.
- Interestingly, the on-going medium-term downtrend has staged the bearish reversal right at the median line of its primary/major ascending range in place in since Oct 2008 low of 1.70 which acted as a resistance at 4.96 (see weekly chart).
- Current price action is challenging the major ascending range support at 3.24 without any clear signs of bearish exhaustion. The weekly RSI oscillator still has room to manoeuvre to the downside before it reaches an extreme oversold level of 14. In addition, the RSI oscillator remains bearish below its significant corresponding resistance at the 57 level without any bullish divergence signal.
- The key medium-term resistance stands at 3.52 which is defined by the upper boundary of the medium-term descending channel in place since 29 Jan 2018 high and the former swing low areas of 20 Jul/16 Aug 2018.
- The next medium-term support rests at 2.95 follow by 2.83/75 (Fibonacci projection cluster, lower boundary of the aforementioned medium-term descending channel & the swing low areas of 04 Jun/03 Sep 2012),
Key Levels (1 to 3 weeks)
Intermediate resistance: 3.34 (gapped down from on 11 Oct 2018)
Pivot (key resistance): 3.52
Supports: 3.24 (downside trigger), 2.95 & 2.83/75
Next resistance: 4.07
The share price of Bank of China looks vulnerable for a major bearish breakdown as long as the 3.52 key medium-term pivotal is not surpassed and a break/daily close below 3.24 reinforces the continuation of the medium-term impulsive down move to target the next supports at 2.95 and 2.83/75.
On the other hand, a clearance above 3.52 put the bears on hold for a corrective rebound to retest the 4.07 resistance (former triangle range configuration support from 09 Feb 2018 & 50% Fibonacci retracement of the on-going decline from 28 Jan 2018 to 11 Oct 2018 low of 3.22).
Charts are from eSignal
StoneX Financial Ltd (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.