China HongXing: Where is the Target?

Looking at a bigger time horizon on China HongXing, a Cup and Handle pattern is observed and current breakout from 61.8% Fibonacci Retracement Resistance at about $0.175  coincides with the Cup and Handle breakout. Price target of this breakout is $0.23. However, China HongXing needs to clear the immediate long term down trend resistance at about $0.20 first. $0.175 should provide a good support.

This Post Has 11 Comments

  1. RL

    I’m not convinced that this is a cup with handle pattern.

  2. Marubozu

    RL, maybe you can explain why. This is the first time I analyse this cup and handle pattern.

  3. RL

    Cup with handle is usually a bullish continuation pattern. In this case, there clearly is no prior bullish trend.

    Volume during the downsloping handle should be lighter than during the cup. Light volume during the handle indicates light profit-taking. In this case the volume during the ‘handle’ is so much heavier than the ‘cup’.

    There should be an expansion of volume after breaking out from the handle. In this case, there is heavy volume after the ‘handle’, but its eqaully as heavy as during the ‘handle’, not heavier.

    TA is not about hard rules and there should be some leeway, but in this instance, none of the characteristics of a cup with handle are met. Hence I’m not convinced at the moment.

    I’m currently still of the opinion that I stated in your previous post on China Hongx.

  4. RL

    Oh well, looks like I was wrong about being bearish on China Hongx. It was very bullish today with very heavy volume.

  5. RL

    Shooting Star formed today with heavy volume.

  6. Marubozu

    RL, I don’t think that is a shooting star. It has a short shadow at the other end. However, China HongXing may be facing resistance between $0.20 and $0.21. Let’s see the bull can continue to push to clear this level.

    Although last quarter P&L does not look good but the balance sheet is solid with RMB 2 Billion Cash and NAV of S$0.31. Rolling PE is as high as 39 now but the stock has the potential to trade towards $0.31 on top of the recent good news of received an order book with approximately RMB 1 billion worth of orders secured at the 2011 Spring/Summer Collection trade fair, held in Xiamen
    in August 2010. Delivery of these orders will take place
    from January to March 2011.

  7. RL

    I totally agree with you that it is not a shooting star based on strict definition.

    But I think we both agree that there is some flexibility in TA, and what is important is the essence of the message. For now, what I see is the upper shadow is equal to the typical daily range of the last few weeks. My interpretation of that is high volatility, and an enthusiastic supply of bears pushing the price back down.
    Very much similar to the activity that forms a shooting star.

    The heavy volume and long upper shadow would suggest that there are many buyers who ended up as ‘losers’ by the end of the session, and might be eager to cut their loss, thereby fueling additional supply.

  8. RL

    Doji formed today with volume drying up.
    Could be a sign of a buying climax where everyone who wants to buy has already bought, and no one else left to push the price up further.

  9. RL

    Oh wow… This is turning out to be another runaway train like Genting.

  10. Lac

    Marubozu…any update on Hongxing?

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