Get Away? (2010-11-11 CCB analysis)

There were worries about China restricting amount of cash reserves in banks after People Bank of China announced an increase in interest rate. So let's do some analysis on one of the China banks.

Here is the daily chart of China Construction Bank (0939.HK):


The price jumped from 7.35 to as high as 8.00 in 3 days due to the rallying stock markets led by QE2.0 by Fed. However, after reaching level of 8.0, a shooting star candlestick pattern was formed. This showed that many investors were selling their shares, which therefore formed the bearish rejection.

Following the rejection, the price dropped in these 3 days. From the chart, it looks like that it would keep on falling. MACD and EMA gave bearish signal. So we could expect that CCB would fall back to the zone of 7.03-7.35. This is a support zone to the zone, if you are very optimistic investor and have the views that it would bounce, you could buy some shares at this zone.

However, the high-level of MACD makes me feel bad. Even if the price does not plunge through the zone, it is more likely that it would move within the zone, forming a trading range before MACD goes back to a normal level.

It would be better to stay away from it before any signal is given.