An Invitation to China's Breakout Party

After more than a 45% decline China’s ETF, FXI, found a bottom early last year and has been moving higher ever since. Earlier in May of this year it retested October 2015’s prior high (~$40.5) and failed.  This should come as no surprise because prior resistance will continue to act as resistance until it is broken through in which case it becomes support.

Unlike what happened in Oct 2015, the bulls this time had enough in the tank to push strongly through resistance last week. Notice how this time price is above the (red) 200 day moving average which is now rising rather than falling. While not spectacular, volume was almost 20% higher than its average which helps confirm last week’s break out is likely the real deal and worth consideration in your portfolio.

After breakouts, investors want to see a follow through the next week preferably with a big white candle like the one that printed last week and on continued large volume. But the market does not always give us what we want so we need to be prepared for a pullback and retest of the prior $40.5 resistance line (which now should act as support). If that occurs and price holds, those that missed this breakout buy would be provided what I would consider a nice second chance on what looks to be an excellent opportunity.  The (ascending triangle) pattern upside target, if the market wants to go higher, is back near the 2015 prior high around $52 a 30% rise from the breakout level.

San ramon independent investment advisor certifed financial planner, CFP NAPFA fee only - 7-17-17 -china