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Ironically, last week’s rally in the Shenzhen A-Share Index has not only seen volume increase, but so, too, observed volatility as investors realise this is no longer a one-way street and

the index can rally sometimes. The corrective bounce, which started from support at a Fibonacci 61.8 per cent retracement from 2012’s low, has taken it back up to the halfway point between 2008’s low and 2015’s high (1,890 points). We expect the rally to fizzle out ahead of the psychological 2,000-point level, a Fibonacci retracement resistance level, as longer-term momentum is still bearish as are 50 and 200-day moving averages. Further out, we continue to allow for many more months of backing and filling either side of 1,700 points.

Nicole Elliott is a technical analyst

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