China A50 cash – New trade idea

Trading the A50 cash can require a greater risk tolerance than, say, the Australia 200 cash, as the moves are far more explosive. Of course, this needs to be balanced with risk and money management.

Source: Bloomberg

I had been looking at long China H-share, short China A50 cash trades with a view to net off the potential outperformance from the Hong Kong markets. I still believe this will work well, but may take some time to evolve and in the short-term I am actually more enthused by the price action in the China A50 cash and CSI 300 cash indices.

We saw bullish outside day reversals on both markets yesterday, with price trading below Wednesday’s low and closing firmly above the high. To me, this shows the bulls are firmly in control and suggests we could see a continuation of the trend higher.

Granted the index has had a strong run and valuations are far less compelling, I feel this index is one traders can look to be long – as long as the March uptrend remains intact (currently seen at 12,900). Pullbacks to the 13,500 would be preferred and a subsequent break of 14,000 would be highly bullish given the trend looks achievable.

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