(Click On Charts To Enlarge)
Interesting juxtaposition of the charts of QXM and FXI. Both were beautifully positioned this week for "The Perfect Storm," a marriage between good technicals and good news on the fundamentals.
QXM broke out of its 5-month Bullish Falling Wedge two days ahead of earnings and was ready to go on the upside, but disappointed. It gapped down at the open (usually a good sell) and landed at the bottom of the Wedge at the close. As bad as that 15% smackdown was, QXM has held at the neckline of the Bullish Inverse H&S for the past three sessions, the last two on two Bullish Doji Star Hammers for two successful retests of the neckline, so QXM hasn't given up the ghost entirely. The lows of the past two sessions both were 6.35, so that's nearby short-term support while QXM dusts itself off and considers, "Shall we try this again?!"
Yesterday's high in QXM was 6.61, so with those two Bullish Doji Star Hammers in place at the neckline, some traders might use 6.62, a penny above that high, as a "Buy Pivot," to enter the stock for at least a gap-filling rally, using something below the 6.35 lows, or whatever low is made prior to the print of 6.62, as their stop. QXM is thinly traded, though (only 117,200 share volume yesterday), so the trade wouldn't be very attractive to anyone who trades in size.
In contrast to QXM, FXI completed the Right Shoulder of the Bullish Inverse H&S pattern that we've been watching since April 11 and it was able to capitalize on "The Perfect Storm" between the good technicals and the good news out of China on corporate earnings and favorable tax treatment on stock transactions with a Breakaway Gap yesterday morning out of the Bullish Inverse H&S pattern, and with a big 6% gain on the day. As long as FXI holds above the neckline, 168.86 and 183.89 are IN PLAY.
FXI-related news (excerpted):
By John Spence, MarketWatch
Last update: 9:30 p.m. EDT April 23, 2008
BOSTON (MarketWatch) -- Exchange-traded funds tracking Chinese stocks rallied in U.S. trading Wednesday after the government, in a widely anticipated move, lowered the taxes on stock transactions.
An ETF tracking an index of the 25 largest and most liquid Chinese public companies, iShares FTSE/Xinhua China 25 (FXI:iShares:FTSE/Xinhua
News, chart, profile, more
Last: 157.61+8.91+5.99%
China's Shanghai Composite Index was even more volatile and dropped as low as 3,089.89 before staging a sharp rebound as strong corporate earnings encouraged buyers to lap up resource and banking stocks. Hopes the government may announce measures to support the local stock markets, one of the worst performers in Asia so far in 2008, also aided the recovery
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