The China50 has seen post-pandemic optimism as it has traded in an ascending channel since April. A break to the upside occurred in July, however, this momentum did not remain as prices fell back into the channel.
Mean regressions have been evident since August as we now look to a move to the downside. Prices are moving away from the lower border of the Ichimoku cloud, indicating a move to the 15600 region.
The recent bearish divergence on the momentum indicator could have exhausted, leading to a possible bounce on the lower regression. Should prices remain inside the channel, we could expect another attempt at a cloud engulfment, and a move to the previous top at 15934.
A look at a short-term perspective shows that the bias remains to the downside. Prices have now fallen past the 38.2% and the 23.6% of the 16247/15678 downside Fibonacci leg.
Should prices move past the lower leg level, then the bearish divergence will come into fruition. Whilst the Tenkan convergence line hangs on, the Kijun baseline will look to drag prices upwards.
The confluence of both the convergence, base, and 38.2% Fibonacci will be a key level should momentum swing back to the upside.
