Emerging markets a mixed picture

A look at how some emerging market Indices (China, India and South Africa) are setting up technically amidst the current market narratives.

Shaun Murison ShaunMurison_IG
Senior Market Analyst, Johannesburg

Publication date : 2018-07-13T14:38:33+0100

An escalating trade war narrative has been and is one of the dominant themes in the global market place this year. Concerns over the future of global economic growth have been raised as a likely by-product of the trade war and in turn sentiment has been particularly negative in the emerging market space.

In a previous note (click here to view) we addressed the resulting effects in Q2 2018 on emerging market currencies (BRICS). In this note we take a look at how some emerging market Indices (China, India and South Africa) are setting up technically amidst the current market narratives.

China (CSI300)

The CSI300 Index has formed an inverse head and shoulders pattern, labelled with the L, H & R on the chart above. The pattern is suggestive of a short term reversal in trend from down to up. A close above the “neckline” at 3435 marks a series of higher price highs, while the lows marked by the “H” and the “R” show a series of higher price lows. These are the building blocks of an uptrend.

From a trading perspective, 3660 level becomes the initial resistance target from the move, while a close below the low at 3306.6 is used as the failure (stop loss) level.

India (NIFTY 50)

While the CSI300 Index looks to be reversing its downtrend (in the near term), the India 50 Index looks to be continuing its uptrend at present.

The Index has broken out of the triangle shaped price consolidation. The upside breakout has moved the index into overbought territory. The overbought signal is not considered an indication to trade against the uptrend (in the current context), although should a pullback occur, it could provide second opportunity for long entry. 11330 is the level projected and targeted from the breakout, while a close below 10680 is used as a failure level for the setup.

South Africa 40

The price environment for the South Africa 40 Cash Index is that of a range bound nature. Circled blue we see a bearish candle stick reversal pattern from around the 52340 resistance level. This reversal signal is supported by the overbought signal. These signals are considered bearish and suggest further short term declines.

50417 is the initial support target favoured from the move, although a close below this level is considered to hold the potential for a more meaningful decline towards the 50417 level. Traders already committed to the short trade on the index might consider using a close above 51400 as the stop loss / failure level. Traders not yet committed to the move might prefer waiting for a break (with a close) below the 50417 level for short entry.

Emerging markets a mixed picture

China (CSI300)

South Africa 40

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