Shanghai Market Positive Signs

Shanghai stock market had a series of corrections and rallies for the past 2 weeks.   The index hit a low of 2661 in late January before rebounding to a high of 2994 on 22 Feb.  The index is now testing resistance at current levels.

There are a few positive signs in the current market behavior.  Firstly the index is able to rebound off its critical support at 2681 within one trading session even though it dropped below this support during the correction.  This shows that bearish selling pressure was not as strong as anticipated.  The second positive sign is a rebound off its Fibonacci retracement.  The rebound occurred exactly at the 38.2% retracement.  This usually means (although not 100%) that the index will go on to test its Fibonacci projection level which is at 3122. 

The critical thing now is for the index to go above 2994 level.  If the test of this resistance fails and the index falls below 2884, then all bets are off.