2318 HK: Top of the range for -17% downside
2318 is a leveraged financial play on the Chinese economy which is not doing very well at the moment. The stock has been consolidation in a range between $68 to $80 from July 2018 to today. Stock is back at the top of the range which suggest there is an asymmetrical risk reward trade set-up.
Technically speaking, it is worthwhile to remember 2318 completed a 3-Drive pattern from the 2009 trough in Jan 2018 while fundamentally speaking, it is a victim of the Chinese deleveraging, slowdown in the private sector and a bombed out stock market. Consolidation channels are generally continuation patterns which suggest 2 potential downside scenario:-
#1 a retest of the channel lower boundary for -17% potential downside target
#2 a breakdown from the channel which would imply a CD leg down to $45 to $48, -40%, which coincides with the 78.6% retracement level of the Feb'16 to Jan'18 up-move.
So far, I am commenting mainly from the technical analysis angle with a smattering of fundamentals/equity story. Do let me know in the comments if you folks prefer more TA, fundamentals or a more nuanced view. Knowledge without timing = 0.
Technically speaking, it is worthwhile to remember 2318 completed a 3-Drive pattern from the 2009 trough in Jan 2018 while fundamentally speaking, it is a victim of the Chinese deleveraging, slowdown in the private sector and a bombed out stock market. Consolidation channels are generally continuation patterns which suggest 2 potential downside scenario:-
#1 a retest of the channel lower boundary for -17% potential downside target
#2 a breakdown from the channel which would imply a CD leg down to $45 to $48, -40%, which coincides with the 78.6% retracement level of the Feb'16 to Jan'18 up-move.
So far, I am commenting mainly from the technical analysis angle with a smattering of fundamentals/equity story. Do let me know in the comments if you folks prefer more TA, fundamentals or a more nuanced view. Knowledge without timing = 0.