China's Banks (2010-05-24 3988.HK analysis)

Today HSI "unexpectedly" surged 122 points to 19667.76, but we could never forget that the index is still under the upeer down-trend line (red line I drew in last post). The only reverse signal would be the breakthrough of this line. So my bearish view has not changed.

One of my friends asked my opinion on his stock 3988.HK again (yes he is still holding it). Interestingly, I found that most of the China Banks did not fall severely these days. Instead, they were running horizontally. We may say that this is due to an expectation on rise in profits after PBC announced a third increase in reserve rate. However, as I predict, they would then plunge in great extent together with HSI.



We can see that price of BOC is well supported by the red line and the fibs projection. This might be a reason for the horizontal move. If it breaks the zone (3.88-3.92), the next support would be at 3.75.



The above are the movements of HSI and 3988.HK. We can notice that when the two converges, they would move together at same extent in a short period of time. As I have predicted that HSI would continue its tumble, and BOC is going to move with HSI, then 3988.HK is more likely to fall severely. We should keep an eye on the movements and once they break the support line, we could gain some profits by getting into short positions.