China shares ready for next uptrend as Wyckoff accumulates near completion

A silver lining came after a deep sell-off in the stock market last week, where some of the uptrend, as explained in the video at the bottom of this post, showed a reversal from the extreme downtrend.

On the other hand, Chinese stocks as represented by Invesco Golden Dragon China ETF (PGJ) and KraneShares CSI China Internet ETF (KWEB) started the bottom in March 2022 and surpassed the S&P 500 in May 2022.

Using the Wyckoff Method to Locate the Accumulation Pattern in KWEB

This is important because after the loss of the energy sector (XLE) as a leader in the stock market in mid-June 2022, Chinese stocks could possibly be the next leader to start the next uptrend. Only when the group assumes the leading position, the individual shares are more likely to maintain their upward trend. Let us adopt the Wyckoff method to discover the potential accumulation structure as shown in the diagram below.

After a parabolic uptrend peaked in February 2021, KWEB had a road-to-peak distribution at 97, followed by a downtrend that lasted until May 2022, as shown in the lower channel.

The The first indication of a possible accumulation process appeared in March 2022, when capitulation was established. as reflected in the volume pin (indicated by a blue arrow). A sales peak was created followed by an automatic rally, which set the trading range between 20-33. The automatic rally was seen as a change in Wyckoff’s character, which temporarily stopped the downward trend in a range of trades as it is the largest upward wave since the downward trend began in February 2021.

Subsequent reactions in May 2022 (highlighted in blue) were accompanied by an increase in volume, however they still form a higher low, suggested supply absorption.

On May 31, 2022, KWEB broke decisively above the lower channel and followed a decent rally and tested resistance at 31. This was the first time the lower channel broke out, proposing a change of trend.

The tight consolidation in June 2022 after the resistance hit 33 was shallow and committed above the level of direct support at 30. The increase in volume during consolidation indicates supply absorption, similar to the May reaction, but at a higher level.

The above are all the upward features of KWEB stock accumulation while the market climate is extremely declining.

A clearing and a commitment of over 33 at KWEB will mark the completion of the accumulation from the peak of sales on March 14, 2022 and possibly start a significant power rally sign to test the 40 before another reaction. The next price targets for KWEB are 50 and 60.

In case KWEB fails to maintain support at 30, the duration of the accumulation process will be extended to the trading range 20-33.

Locate the rally before it happens from The Extreme Bearish Sentiment

As mentioned at the beginning of this post, watch the video below to learn how to look for uptrends to predict last week’s rally, while the stock market was extremely downtrending.

Although the short-term trend is up for the S&P 500, it is still a bear rally from the downtrend that started in January 2022. Visit TradePrecise.com to get more free stock market information via email.

This article was originally published in FX Empire

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