China A50 index (Cash) looks undecided since the beginning of March after rebounding off the 12,528 level, following the aggressive drop from the 14,678 peak. Further supporting this view is the marginally lower recent drop to 12,521, where buyers resurfaced and pushed back up towards the lower band of the Ichimoku cloud.
Additionally, the converging in the simple moving averages (SMAs) and Ichimoku lines plus the conflicting signals in momentum indicators, signal an unclear direction. The MACD has just decreased below its red trigger line and the zero mark, while the stochastics %K and %D lines are falling towards the 20 level. That said the RSI in the bearish region is improving.
To the upside, initial resistance could come from the lower band of the Ichimoku cloud. Slightly higher, the Kijun-sen line could interrupt the move towards the upper band of the cloud – where the flat Tenkan-sen line also lies – ahead of the merged 200- and 50-day SMAs at 13,687. Overcoming these obstacles, the 100-day SMA at 13,844 and the high around the 14,000 psychological number could test the climb for the 14,241 peak and 14,678 top.
If sellers retake control, the down move could be boosted by a bearish cross of the 200-day SMA sending the index past the 12,521 low and towards the 12,327 trough from May 9. Diving lower, the 12,129 low and 12,007 barrier may halt further declines from seeing the 11,702 support.
Overall, the very short-term picture appears neutral-to-bearish and only a decisive break below 12,528 would confirm a negative outlook.
