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Stock Selection (H shares): Bank of Communications continues to bounce off key support

Bank of Communications (3328 HKG)



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Key technical elements

  • The “H” share (China based firms listed on the HKEX) of Bank of Communications/BOCOM, the 5th largest bank in China has staged a pull-back to retest the former long-term secular descending resistance from Oct 2007 high now turns pull-back support at 6.45.
  • Recent price action of the last 2 weeks has seen a bounce of 4.5% from the 6.45 key support and medium-term momentum reading remains positive as indicated by the daily RSI oscillator remains positive where it still has further potential room to manoeuvre to the upside before it reaches an extreme overbought level of 87.
  • Medium-term uptrend since 15 Oct 2018 low of 5.39 remains intact where the next significant medium-term resistance stands at 7.50/58 (the intersection of both upper boundaries of the major & medium-term ascending channels & a Fibonacci expansion cluster).
  • The ratio of BOCOM /HSCEI has started to inch upwards since 03 Apr 2019 which indicates a revival of BOCOM’s outperformance against its HSCEI benchmark index.

Key Levels (1 to 3 weeks)

Pivot (key support): 6.45

Resistances: 7.13 & 7.50/58

Next support: 5.74

Conclusion

If the 6.45 medium-term pivotal support holds, BOCOM is likely to shape another potential impulsive upleg to retest the 29 Jan 2018 high of 7.13 before targeting the next resistance zone of 7.50/58.

On the other hand, a break with a daily close below 6.45 invalidates the bearish tone for a corrective decline towards the 5.74 key major support (also the lower boundary of the major/primary ascending channel from 11 Feb 2016 low).

Charts are from eSignal



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