Investors Put Money On Shanghai

The Shanghai Composite Index was pretty boring from 2000 to 2006. Look…

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And then things got interesting…

China’s stock market went through a bubble boom and bust, along with much of the world. From 2006 to 2008 the Shanghai Composite Index was up over 300%!

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Looking backward… the Shanghai adds validity to a premise we’ve discussed before. That is, post-bubble prices (we could say “popped prices”) return to the level at which the bubble first began.

Looking forward… I’m starting to see technical opportunities for the next rally higher. First, the Money Flow Index has been edging higher. This suggests investors’ money is flowing into the market, which is typically bullish for prices.

Second, the Stochastic Oscillator shows the Shanghai Index is currently in oversold territory. This tells me prices are relatively low. If the Stochastic starts trending higher – making higher highs and higher lows – this would add further support to a bullish outlook.

I’d like to see both the Money Flow Index and Stochastic Oscillator moving higher, together. When that occurred in late 2008, the Chinese market rallied 97% in just nine months!

I’ll continue to keep an eye on the Shanghai.

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Categories: Economy

About Author

Adam O'Dell has one purpose in mind: to find and bring to subscribers investment opportunities that return the maximum profit with the minimum risk. Adam has worked as a Prop Trader for a spot Forex firm. While there, he learned the fundamentals of trading in the world’s largest market. He excelled at trading the volatile currency markets by seeking out low-risk entry points for trades with high profit potential. An MBA graduate and Affiliate Member of the Market Technicians Association, Adam is a lifelong student of the markets. He is editor of our hugely successful trading service, Cycle 9 Alert.