Critical level (2011-05-13 Agricultural Bank of China 1288.HK analysis)

Hang Seng Index plunged below 23,000 yesterday, reaching as low as 22,985, but was able to close above 23,000, which is a minor psychological support. Nevertheless, the next major support would be at around 22670 on weekly chart.

Despite the poor investment atmosphere, I am still trying to find whether there are stocks worth buying.

Daily chart of Agricultural Bank of China ABC (1288.HK):


As a friend of mine bought this stock last week, I am trying to analyze whether he could still hold it or when he should cut loss.

The green uptrend line represents a major support to the stock price. It started from the trough in Feb 2011, and has successfully supported ABC for 3-4 times.

Currently, ABC is testing this line again. If the line still works, the stock price would bounce and could at least reach the previous peak at around 4.65.

However, if it breaks down, I discover that the large gap in late March would possibly be filled. That means the price could drop to as low as around 4.20.

Therefore, 4.50 is a critical level now. If it breaks down and the selling force is too large, ABC holders should have no time to hesitate but to sell all the shares to stop loss. If it rebounds, due to the current bad global stock markets, the stock shouldn't be held for a long time. Holders should sell during the rebound.