Key Takeaways
- The iShares MSCI China ETF has risen sharply this week, bolstered by Beijing announcing significant stimulus measures in recent days to revive the country’s economy.
- After forming two distinct lows at comparable levels on the chart between October 2022 and January this year, the fund’s price broke above a multi-year downtrend line in late April, raising the prospect of a double bottom.
- Investors should monitor key overhead levels on the ETF’s chart around $56, $65, and $77, while eyeing the $47 area during pullbacks.
The iShares MSCI China ETF (MCHI) has gained nearly 20% this week, bolstered by Beijing announcing significant stimulus measures in recent days to revive the country’s economy.
Chinese stocks have come under pressure in recent years due to the country’s steep real-estate downturn and slumping consumer confidence, which has caused deflationary pressures to weigh down the world’s second-largest economy.
Below, we take a closer look at the ETF’s weekly chart and use technical analysis to identify important price levels to watch out for amid the fund’s recent stimulus-driven moves.
Potential Double Bottom
After forming two distinct lows at comparable levels on the chart between October 2022 and January this year, the MCHI ETF’s price broke above a multi-year downtrend line in late April. Such a formation raises the prosect of a double bottom, a W-like chart pattern that forms after an extended decline and indicates a potential trend reversal.
More recently, the fund retraced within a flag to the respected 50-week moving average (MA) before staging a decisive breakout this week on the highest weekly trading volume since late January, pointing to institutional investors participating in the bullish move.
The ETF was up 1.8% at $51.01 in mid-afternoon trading Friday, following up on a 9% rise the previous session. The fund has gained 20% this week.
Key Overhead Chart Levels to Watch
Looking ahead, investors should monitor three overhead levels on the ETF’s chart.
The first sits around $56, where the fund’s price finds a confluence of resistance from multiple peaks and troughs from May 2019 to January last year and the downward sloping 200-week MA.
A breakout above this level would confirm a double bottom pattern on the ETF’s chart that could see bulls drive a move up to the $65 area, a region where investors could look to lock in profits near a trendline joining comparable trading levels between late 2017 and early 2022.
A longer-term bullish uptrend could see the ETF rally to $77, where it would likely encounter selling pressure near the prominent January 2018 swing high, which closely aligns with a series of price action from mid-2020 to mid-2021.
Monitor This Important Pullback Level
During pullbacks, investors should closely monitor the $47 level, a location on the chart where investors who prefer not to chase breakouts may look for buying opportunities near a horizontal line linking the May 2022 swing low and May 2024 swing high. A failure to hold above this important area could see the fund retest its 2024 lows.
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As of the date this article was written, the author does not own any of the above securities.