Shui On Land (272 Hong Kong) – chart set up

Background

As readers will be aware, I include the Hong Kong stock market amongst the markets I monitor.  For technical traders, it seems to produce more than its fair share of attractive trends with the added advantage of convenient trading hours for Australian traders.

Xintiandi Entertainment Complex Shanghai. Source: Shui On Land

Xintiandi Entertainment Complex Shanghai. Source: Shui On Land

Shui On is a property developer and manager, controlled by Hong Kong billionaire Vincent Lo who graduated from the University of NSW in Sydney. The company is headquartered in Shanghai with most of its properties in China. Shui On operates in most of the property sectors including residential, office, retail and cultural centres. The photo above features its flagship Xintiandi Entertainment complex which was based on redevelopment of old housing properties in Shanghai.

In early January, the company issued a profit warning citing reduced completions in response to government initiatives to curb the property market last year. Over the past 2 months the chart has consolidated in a triangle pattern that looks to have interesting possibilities

Weekly Chart

Shui On Land Weekly 18 Jan

The weekly chart has a number of features which for me create a one sided bias on to this chart in which I would respond to sell set ups but be prepared to stay out of buy set ups at this stage. These features are:

  • Price is now well above the 200 day moving average creating plenty of scope to revert to the average.
  • The slow stochastic is trending down and has recently crossed out of the overbought zone above 80 (see arrow). In this situation any breach of support or an emerging downtrend could pick up rapid momentum
  • The rally since October 2011 looks to be in the 5th swing which positions this chart for a potential correction of the whole move since 2011 when it next has a turning point

Daily Chart

Shui On Land CFD - Daily. Source: CMC Tracker

Shui On Land CFD – Daily. Source: CMC Tracker

I’ve outlined a potential descending triangle on the daily chart above. For those who subsribe to the bearish bias,  typical strategies for this triangle would include:

  • Sell if price rallies but again fails at the triangle resistance line. Here you would be positioning for an early entry on an eventual breach of the triangle support and a move lower
  • Sell if price falls from here and breaks the triangle support. A typical entry strategy may be to apply a small price filter waiting for the market to get clear of the support zone just below the actual triangle support line before shorting
  • Stay out of buy trades if price breaks above the triangle resistance. In this situation a trader with a bearish bias would be happy to let the market rally above the most recent peak preferring from a risk: reward point of view to look for new sell set ups for a major reversal from higher levels.

About Ric Spooner

Over 30 years market experience - professional trader, broker, director
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