Invest in China (FXI)? - Quick Note
Many investors have found investing in Chinese stocks very challenging and frustrating in recent years. I’ve heard many investors try to call the bottom in Chinese stocks, only to get disappointed. We decided to give it a shot and apply our technical analysis and cycle analysis methods to provide an edge and see if the Chinese stock market (FXI) will provide us with some opportunities this year.
The weekly chart below shows that the Chinese stock market has been in a downtrend since February 2021. Most of the time since then, FXI trended lower below down-trending 10 and 21 EMAs. When the price of FXI dropped too low, it did pendulum swings to test the 21 (blue) or 50 (green) week moving averages, but could not hold them and returned to the downtrend. For a chance of a bona-fide rally, FXI needs to break the downtrend line and hold above $25. Then it has to hold above the 50-week SMA above $26. There is hope, as the RSI indicator shows a bullish trend, while the MACD made a bullish crossover (albeit below the 0 mark).
Looking at the daily chart of FXI we can see why trading the Chinese market is so hard. The cycles are quite fast. FXI seems to follow a 32 trading-day cycle with 16 trading-day half-cycles. On the positive side, as of mid-February, it is above an up-sloping 50 SMA. A half-cycle low around 4/1 could bring a buying opportunity. Same with the cycle troughs at 4/23, 5/15 and 6/7. The next big resistance is the 200 SMA at around $25.53. It would be very encouraging if FXI could trend above the 21 EMA. The Stochastics indicator points to some upcoming strength, and FXI has to prove to us that it is ready for an uptrend.
For Paid Subscribers we’ll disclose our Cycle Forecasts for FXI from 2020 to 2030 and until the end of 2024. Our Q2 2024 Cycle Forecasts are available here: https://cyclesedge.com/
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