The CSI 300 rose 1.87% this week on higher but below average volume after falling 0.62% on low volume last Friday. The market remains in a Confirmed Uptrend with three distribution days. China’s GDP fell 6.8% y/y in Q1 2020, larger than the -6% forecast and reversing Q4 2019’s 6% expansion. This marks the first contraction on record in China. Factory production fell less than expected, -1.1% versus the -5.2% forecast. The market expects the economy to remain under pressure in the second quarter because consumption slumps and the pandemic is devastating demand from its major trading partners, so we would watch China’s further policy support. This week’s trading volume was higher than last week’s but remained under the 50-day moving average, so we believe it’s still too early to be aggressive. We recommend a disciplined and selective approach, focusing on stocks with high RS breaking out from a sound base. The CSI 300’s next support is at ~3,627 (-5.5%), followed by ~3,503 (-8.7%). Resistance is at the 50-/200- DMA at ~3,890 (+1.3%), followed by the 100-DMA at ~3,940 (+2.6%).
Symbol: CMT.CN
China A Shares
The CSI 300 rose 2.1% for the first three trading sessions this week and remains in a Confirmed Uptrend with two distribution days. Support is at the lower edge of the previous gap (~3,627, -4.3%), followed by March’s low (~3,503, -7.6%). Resistance is at the 200-DMA (~3,900, +2.8%). Global stocks gained on hopes the pandemic is peaking, boosting risk appetite in the domestic market. But as damage to economy remains highly uncertain, we advise staying patient. The consistent low trading volume confirms our cautiousness. As we expect the CSI 300 to consolidate sideways at 3,627–3,900 in the near term, we recommend a selective approach, focusing on stocks that have broken out of solid bases or bounced off key support with volume. In addition, as the market enters Q1 2020 earnings season, companies’ performance will become the focus. Pay attention to names with robust Q1 earnings growth (guidance) or that are expected to recover soon.
Global Focus Emerging
The CSI 300 rose 2.1% for the first three trading sessions this week and remains in a Confirmed Uptrend with two distribution days. Support is at the lower edge of the previous gap (~3,627, -4.3%), followed by March’s low (~3,503, -7.6%). Resistance is at the 200-DMA (~3,900, +2.8%). Global stocks gained on hopes the pandemic is peaking, boosting risk appetite in the domestic market. But as damage to economy remains highly uncertain, we advise staying patient. The consistent low trading volume confirms our cautiousness. As we expect the CSI 300 to consolidate sideways at 3,627–3,900 in the near term, we recommend a selective approach, focusing on stocks that have broken out of solid bases or bounced off key support with volume. In addition, as the market enters Q1 2020 earnings season, companies’ performance will become the focus. Pay attention to names with robust Q1 earnings growth (guidance) or that are expected to recover soon.
China A Shares
The CSI 300 rose 0.09% this week on lower volume and remains in a Confirmed Uptrend with two distribution days. For the first quarter of 2020, China’s A share market outperformed the global market, with the tech-heavy ChiNext index gaining 4.1%. While most countries’ markets suffered heavy losses, China’s major indices were trading constructively with resilience. Among stocks with top liquidity (ADV >$30M), 63% were trading above their 200-DMA. Despite the uptrend, we remain cautious. Trading volume was low and the CSI 300 and Shanghai Composite Index are still below their 200-DMA. The market is expecting more policy stimulus, and U.S. recession fears could also impact domestic sentiment. Investors are advised to focus on sectors with low overseas exposure (such as Consumer Staple, Retail, Building Materials, and Agriculture). We advise remaining patient and maintaining a defensive approach. The CSI 300 is expected to consolidate as it approaches resistance at its 200-DMA at ~3,900 (+5.0%). The next support lies at the previous low of ~3,503 (-5.7%).
Global Focus Emerging
The CSI 300 rose 0.09% this week on lower volume and remains in a Confirmed Uptrend with two distribution days. For the first quarter of 2020, China’s A share market outperformed the global market, with the tech-heavy ChiNext index gaining 4.1%. While most countries’ markets suffered heavy losses, China’s major indices were trading constructively with resilience. Among stocks with top liquidity (ADV >$30M), 63% were trading above their 200-DMA. Despite the uptrend, we remain cautious. Trading volume was low and the CSI 300 and Shanghai Composite Index are still below their 200-DMA. The market is expecting more policy stimulus, and U.S. recession fears could also impact domestic sentiment. Investors are advised to focus on sectors with low overseas exposure (such as Consumer Staple, Retail, Building Materials, and Agriculture). We advise remaining patient and maintaining a defensive approach. The CSI 300 is expected to consolidate as it approaches resistance at its 200-DMA at ~3,900 (+5.0%). The next support lies at the previous low of ~3,503 (-5.7%).
China A Shares
The CSI 300 rose 1.56% this week on lower volume. We upgraded the market to a Confirmed Uptrend after Tuesday’s follow-through day on the fourth day of a Rally Attempt. There are no distribution days.
Global Focus Emerging
The CSI 300 rose 1.56% this week on lower volume. We upgraded the market to a Confirmed Uptrend after Tuesday’s follow-through day on the fourth day of a Rally Attempt. There are no distribution days. The index found support at ~3,500 and we would like it to remain above this level to be constructive. Although China’s market is holding up better than most overseas markets, we reiterate the need to stay cautious as trading volume has been less than average and the index remains below key resistance. China could follow the volatile U.S. market and become choppy, so we advise investors to maintain a defensive approach. The Health Care, Consumer Staple, and Retail sectors led the gains in the five trailing sessions and we advise focusing on defensive ideas from these sectors. The next support remains at recent lows of ~3,500 (-5.6%) then the 200- DMA at ~3,900 (+5.1%).
Won Global View
The U.S. market has shifted to Rally Attempt. The Nasdaq has held above its March 18 intraday low (6,686 (-2.8%)) for three sessions. The market status will shift back to Downtrend should this low be undercut. If, however, the Nasdaq stages a follow-through day above this low, the market status will be upgraded to Confirmed Uptrend. Indices and ideas have suffered severe technical damage, therefore, even if a follow-through day occurs this week, we would only advise a small increase in risk in high quality high relative strength ideas.
China A Shares
The CSI 300 fell 6.2% on lower volume this week. We downgraded the market to a Downtrend as the index, following the global selloff, slumped 4.3% and breached its 200-DMA Monday. The index hit 52-week lows of 3,503 intraday Thursday and is testing persistent support at the gap of 3,520–3,556. If 3,520 (-3.6%) fails, there would no clear support until the 2019 lows of 2,935. The next resistance lies at the 200-DMA at 3,900 (+6.7%).
Global Focus Emerging
The CSI 300 fell 6.2% on lower volume this week. We downgraded the market to a Downtrend as the index, following the global selloff, slumped 4.3% and breached its 200-DMA Monday. The index hit 52-week lows of 3,503 intraday Thursday and is testing persistent support at the gap of 3,520–3,556. If 3,520 (-3.6%) fails, there would no clear support until the 2019 lows of 2,935. The next resistance lies at the 200-DMA at 3,900 (+6.7%). As the coronavirus pandemic and fear of economic recession in Europe and the U.S. continue hitting overseas markets, domestic market sentiment will suffer even though China’s market has been resilient. The CSI 300 bounced off recent lows, and we will shift the market to a Rally Attempt should it hold above this low for two days. Investors are advised to stay cautious and focus on defensive names with RS Ratings near highs.
