Shanghai In Distribution Mode

Shanghai market broke its 200 day moving average this week, moving into “Distribution” phase. Inflation is a big concern in China and it is using every means possible to keep inflation in check. This is putting pressure on the stock market as monetary tightening tends to hurt corporate earnings and put a brake on the economy.

The market regained 2700 level on Friday but in order to negate the bearish view, the index needs to break the down trend channel line which is at 2800 level. A break below 2700 gives a target of 2580 which acts as a support for this market.

The trend for the market is now in “Distribution” stage and it will move to “Bearish” phase if the 50 day moving average moves below its 200 day moving average. All eyes will be on the market next week to see whether the index is able to hold above its support level.