Technical analysis
Price | € 95.29 | 52 weeks range | € 94.96- € 129.90 |
Beta | 1 (3 years) | Structure | Physical replica |
Benchmark | FTSE China 50 Index | Dividend | Quarterly |
iShares China Large Cap UCITS ETF (ISIN: IE00B02KXK85) has targeted exposure to the 50 largest Chinese stocks listed on the Hong Kong Stock Exchange.
FXC after peaking at € 129.90 began a prolonged decline which found its low in recent swings at € 88.80. We believe that the ETF is now in a consolidation phase to subsequently reverse to the upside.
Price
On the daily chart we can see the breakdown of the bearish trendline in October 2021 and the subsequent test in January 2022. We see this oscillation as a positive confirmation of a change in trend: if before the trend line acted as a selling area, now it seems to act as an area of purchase and upward fluctuation.
In terms of price fluctuations, we can see the large side channel in place since the beginning of 2017 which now sees the price at a strong support area and € 116.00 resistance.
By shifting the focus to the weekly chart, and therefore a longer-term time horizon, we can see how the large area between € 90.00 - € 98.00 acts as a watershed for the start of wider swings.
Indicators
Looking at the MACD and RSI indicators on the daily chart we see a gradual gain in strength: the former after a long phase below 0, is gradually returning to bullish territory.
In this case, we believe that the MACD and RSI indicators can be better appreciated on the weekly chart: on this it is in fact possible to notice the positive divergence with the price fluctuation.
Analyzing the period from September 2021 to today, we can see increasing MACD and RSI and a substantially unchanged price: we consider this divergence as a further indication of a possible change in trend in the medium to long term.
We believe this divergence can help us to separate the strong past fluctuations, such as March - November 2008, August - October 2011, September 2015 - March 2016, from the current one. Specifically, we find the current upward alignment of MACD and RSI interesting.
Moving averages
In this case we have decided to take into consideration the average at 50 (blue) and 200 (yellow) in order to be able to hypothesize both short and medium-long term fluctuations.
Taking the current fluctuation, we note the exceeding of the 50-day average which we consider a good indicator for the short term: a consolidation above this could strengthen the hypothesis that the price reverses upwards.
In fact, assuming a change in trend in the medium to long term, we could see a gradual consolidation between 50 and 200 and then surpass even the latter upwards.
On the weekly chart, the averages at 50 and 200 days allow us to understand that in a bullish view, we may subsequently see an intermediate resistance at € 104-105.00
Conclusions
At current price, we believe that the iShares China Large Cap (FXC) ETF is an interesting tool in which to gradually enter with subsequent price confirmations.
We believe that the current consolidation between € 90 - 98.00 may soon break upwards, returning to a longer-term horizontal channel.
The achievement of € 103.00 could be further confirmation of the change of pace
The medium-long term general picture becomes even more interesting when we consider the weekly chart: the alignment of the MACD and RSI indicators makes us think of a possible uptrend change and not a continuing bearish trend as happened in the past to similar price levels.
The analysis will be updated upon reaching € 104.00 or € 88.00
Entry range € 98 - 100.00
Target 1 €116.00
Target 2 € 124.00
Stop loss € 84.00
Graphs
OTB Global investments
27 January 2022
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