The iShares China ETF (NYSEARCA: FXI) may be bottoming and should offer good risk/reward for traders here.
Bottoming processes take time but appear to be underway. So buying the dips over next 1-2 weeks looks like a good idea.
To me, a deal is at hand. I’m expecting a bit more volatility but an opportunity for outperformance in the weeks ahead.
That said, the rally this week did NOT accomplish enough to turn the trend bullish (so the trend is still DOWN). However, this week’s move has been sufficient to help momentum start to stabilize.
We’ve had a Sharp one week rally as part of the larger downtrend.. and it appears to have met downtrend resistance at 42 (as expected).
So the downtrend is still intact technically but I would be a buyer of all dips in the days/weeks ahead as I do believe that Chinese equities are a good risk/reward technically and that downside is limited.
iShares China ETF Chart – Bottoming Process?
However, in the bigger scheme of things, after having given up about 62% of the prior 2 year rally from 2016-2018, I view FXI as being favorable to start nibbling at for intermediate-term investors.
Momentum got to near oversold levels in October. And on a weekly basis has stopped moving lower and begun to stabilize when looking at Relative strength index – RSI.
From a trading standpoint, there are 2 different areas of resistance to note: one at 42 from the downtrend from June and the other at 43. Until 43 is exceeded, the trend is down. But it does look like a good spot to take a shot at being long for intermediate-term investors.