Shanghai Comp to stay bullish with next major resistance at 3587 - Credit Suisse

FXStreet notes that Shanghai Composite finally paused on Tuesday as the market closed only marginally higher. Nevertheless, economists at Credit Suisse maintain a bullish outlook with next resistance at 3400/07 before the important medium-term resistance at 3587.

“The market holds a long list of supportive technical factors which keeps us biased higher, including very strong momentum, with the daily RSI at the highest level since 2014, suggesting a real possibility that we are moving into a ‘bubble’ phase similar to that 2014 blowup, as well as the surge in volume, which is also at the highest levels since 2014/15.”

“Next minor resistance is seen at the 3400/07 psychological barrier which stalled the market on Tuesday, then the 38.2% retracement of the 2015/2019 fall at 3485/87. Given the size of the base though, a test of the 3587 high and eventually beyond here seems likely.”

“Near-term support moves higher to 3337/33 gap and the risks stay directly higher whilst above here. Below here would suggest a correction back to the 3188 gap, which we would look to floor the market if reached.”