Now that the SSEC finally is breaking out, we can look for interesting setup on Chinese stocks.
BORN is consolidating after the huge breakout of October 2013 that ended the downtrend and the two minor breakouts of December 2013 and March 2014. Volume is drying up and price is close to the 10 and 30 weeks SMAs. The SMAs are all pointing up indicating that the uptrend is still there
Pice is resting above the 10,30 and 50 days SMAs which are all very close. The last three days were down days on very low volume (less than half the average of last 20 days) possibly indicating that sellers are finished and the stock is ready to rise. This is a good low risk entry point on this stock with a possible exit strategy if the price would break down the daily averages on high volume or violate the support in area 2.6
CLNT is another name which, after a breakout on huge volume on May 2013, is going through a long consolidation phase with tight weekly closes and low volume. The price is near the 10,30 and 50 weeks SMAs that are all very close to each other indicating a possible low risk entry on this stock.
On the daily chart we can note how recently up-candles were supported by volume while last three days were down-days on very low volume. Yesterday’s candle was a doji which penetrated the 10,30 and 50 days SMAs but closed above them. Moreover, the 10 days SMA just crossed the 50 days SMA. At this price and these conditions a long entry on this name looks good with a re-evaluation if the price would fall on volume in area 5.2, a nice area of support.
Yesterday SOHU reported Q2 2014 results and the price reacted strongly although results weren’t stellar (record revenues of $ 400mln but the company is operating at a loss). The weekly chart shows how the price is consolidating in area 55 – 60 since April, after a retracement from a double top in area 85 – 90.
On the daily chart we can see how, following yesterday’s results, the stock opened lower but reacted strongly closing the day at highs of 57.5 on high volume and penetrating from below the 10,30 and 50 days SMAs (forming a pocket pivot point). Although it’s usually better waiting for a consolidation period after earnings announcements, a breakout of yesterday’s high would be a good entry point on this stock (breakout of pocket pivot) with area 53 – 55 acting as support and possible stop-loss zone.
DISCLOSURE: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
DISCLOSURE: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.