Is China About to Break Out?

by: Bill Luby December 04, 2008 | about stocks: FXI    

Bill Luby

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It was only ten days ago that I thought I would be provocative with an early call on China in Time to Be Long China? Since that time, what looked like a possible cessation in downside momentum has turned decidedly more bullish, with the FXI rising an additional 10%.

The chart below (click to enlarge) shows FXI, the iShares FTSE/Xinhua China 25 Index ETF, closing above its 50 day simple moving average (SMA) for the first time in 4 ½ months yesterday. It has been 27 trading days since the FXI put in a bottom. Since that time, the Chinese ETF has rallied more than 40% off of that bottom.

If FXI can close above its 50 day moving average again today, it will mark the first time in over six months that FXI has closed above that important technical level on consecutive days. Ten minutes into today’s session, FXI is trading at 26.70, down 0.55. With the 50 day SMA at 26.94, any close at 27.00 or above should leave a fairly bullish signal on the chart and support the case for increasing upside momentum.

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This article has 5 comments:

  •  
    Dec 04 06:39 PM
    the Dow is probably gonna correct another 1,000 points on continuing umemployment.

    I'd be cautious here.

    when that happens the fxi wil probably also correct further.
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  •  
    Dec 04 11:25 PM
    If U.S. unemployment grows the things made in China won't be bought and the FXI will collapse. Anybody doubt that unemployment will grow, read the Company Notices. FXI for a trade maybe on false optimism, but for an investment, imho, its way too early. Wait for the bombs to go off and then take your chances.
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  •  
    Dec 05 02:14 AM
    DXD is the obvious ETF to play tommorrow if you expect a 1000 pt drop. It can counteract the drop (DXD RISES AS DOW PLUMETS)....actually I think its the kind of fuel that exacerbates big expected drops, making them steeper and more violent. Its like a big agreed to in advance move, everyone knows it , sees a nasty unemployment figure coming, and buys double short to fuel it and make it worse, thus profiting more from their self fulfiling stock drop prophecy.
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  •  
    Dec 05 08:44 AM
    FXI touched the 50 in July and August numerous times. Now look where it sits. Even if it cleared the 200, it would still be a major loser over the past year. This article smells of a pump or a prayer.
    Reply | Link to Comment
  •  
    Dec 06 12:56 AM
    You'll hear more depressing news from China regarding export: the life and blood of Chinese economy, especially the employment. It hasn't hit the bottom yet. When their Chinese writing appears confusing, the situation must be really bad.
    Reply | Link to Comment
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