Above is the daily chart of Shanghai Stock Exchange Composite Index (SSEC). After big drops in these few days, the index reached a support level. This level is given by the downtrend line the index has been following since October 2009, and broke in September 2010. It changed from resistant to support.
Another support is given by the fibonacci retracement, using the high in Q3 2009 and the low in Q3 2010. SSEC reaches the 50% of the retracement and there is supportive power to the index.
Now it is a critical moment to decide whether the bullish market ends or the drop is only corrections, followed by another bull wave. If SSEC plunges and breaks the downtrend line and fibonnaci level, we can expect it to slump to as low as 2,700. Level of 3,000 would be the upside resistant given by psychological power as well as 61.8%-fibonacci level.
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