The China A50 stock index (CHI50) did little to gain ground after it hit a 5 ½-month low of 12,269 at the end of March, with the index posting moderate moves since then to create a base around that trough. The market is currently trying to surpass its 200-day simple moving average and the technical indicators are somewhat supportive but positive signals are too weak to paint a bullish picture.
The RSI is slowly moving to the upside and the MACD is increasing positive momentum above its red signal line but both indicators are still in bearish territory with the former holding below its neutral threshold of 50 and the latter trending below zero. Besides that, prices are fluctuating far below the Ichimoku cloud, while the 20- and the 50-day SMAs are currently pointing to the downside, hinting that the bearish picture is less likely to turn positive any time soon.
Should the index loose further strength, the red Tenkan-sen line at 12,568 could provide nearby support before the focus shifts back to the 5 ½ -month low of 12,269. If there is a move even lower, negative momentum could pick up speed, stretching the downleg started at the end of January towards 11,863, a level last visited in September.
Alternatively, if the market shows improvement, the index could meet a strong barrier at the 23.6% Fibonacci of 12,889 of the downleg from 14,914 to 12,269, where the 20-day SMA is also located. Any break above this previous support and resistance level could see the blue Kijun-sen line at 12,989 coming into view before there is a retest at the 38.2% Fibonacci of 13,275 which was also frequently congested in the past.
In the medium-term, the outlook is still bearish given that prices continue to trade below the 50-day SMA. However as long as the bullish cross between the 50- and the 200-day SMA remains in place, upside movements cannot be ruled out yet.
