China is quietly breaking out

Two months ago, I talked about the idea to start betting on the China’s stock market and you can see here. I took some profit from FXI, thinking it could come down first before moving further up. Looks like I was too cautious. The Shanghai Composite Index went almost straight up non-stop for a month or so. As you can see, it has clearly broken out upward over its upper trading box range. This is a very bullish move! Taking into consideration how poor the sentiment has been for the Chinese stock markets, how long it has been struggling, and how cheap the Chinese stocks as a whole have become, I think there is a good chance that the Chinese stock markets are entering into an early stage of a multi-years bull run. If this turns out to be true, we are talking about potentially several times the current level based on what happened last time when the Chinese stocks started their bull run. Now the index’s break-out level becomes its support line at around 2150. It will certainly not be a straight line up and likely will be very volatile. But if it declines, I bet it will be supported around the 2150 level and its next upward target will be around 2240. Using this as guidance, I think the safer way to bet on this potential supper bull market will still be FXI. If you are really a risk taker, you can consider a leveraged ETF, XPP for the same 25 Chinese blue chip stocks. I’m already in with XPP.