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A chance to buy Chinese stocks before they soar

Jeff Clark
6 Comments|August 29, 2014

Chinese stocks are in a brand-new bull market.
 
The Shanghai Stock Exchange Composite Index (the "SSEC") – China's version of the Dow Jones Industrial Average – is up around 8% in less than a month. It's up around 10% since we told you about Chinese stocks back in May.
 
And there are much larger gains ahead.
 
But after such a big run-up in a short amount of time, the SSEC is likely to suffer a brief pullback. And that's when traders will have a chance to buy...
 
Take a look at this chart of the SSEC...
 


You can see the terrific rally that followed the breakout of the consolidating-triangle pattern (the blue lines) last month. The SSEC moved straight up to last December's high, where it hit resistance and pulled back.
 
Now take a look at the SSEC's 50-day moving average (DMA). The 50-DMA often serves as a magnet for stock prices. A stock rarely moves too far above or below its 50-DMA without coming back and testing the line as either support or resistance.
 
As you can see in the chart, it's rare for the SSEC to move more than 5% or so away from its 50-DMA. But after last month's big breakout, the SSEC was nearly 10% above its 50-DMA. That's too big of a move too soon. So now the SSEC is coming back down... And it will likely test its 50-DMA as support.
 
Traders should look to buy at that point.
 
China is in the early stages of a bull market. And there are big gains ahead. As I wrote last month, the SSEC could rally to 2,500 over the next few months. So traders should use any short-term weakness in Chinese stocks as a chance to get onboard.

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Comments

Acelove
Jeff would you contact me about those Chinese Stocks please? I would like to see a list of companies. Thx Acelove
2 stars
August 29, 2014
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TheCardinal
Buy the China ETF, symbol is FXI
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August 29, 2014
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alx5
CGG/ http://blog.montash.com/china-drills-7km-borehole-roof-world-oil-gas-hunt/ OIL GAS IS THIS CHINA GOLD INTERNATIONAL OIL AND GAS BIG NEWS AND A GOOD INVESTMENT IF IT IS ANNOUNCED
2.5 stars
September 1, 2014
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Johnny881
v.MXR, 30 million shares o/s, management owns 29%, drilling completed on Nevada property in area of 3 other 1 million ounce plus gold mines, results expected with in the next 2 weeks.
4 stars
August 31, 2014
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PatchHand
The FXI chart looks like junk. Hasn't grown in 5 years and shows a very predictable up and down pattern. Looks like it should be heading back down again. http://finance.yahoo.com/q/bc?s=FXI&t=5y&l=on&z=l&q=l&c=
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August 30, 2014
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EOIM
Before buying any China stock, you must read this page: http://chinastockfraud.blogspot.ca/
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August 31, 2014
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