Shanghai Composite

In my previous post on 8^th January 2016, Shanghai Composite index, I wrote, “Shcomp moved up from 3285 to 5050 levels before the equally spectacular crash after completing my target. Shcomp looks weak and will correct going forward.”

In the last three years, Shanghai composite continued its correction and made a low of 2479. The correction looks impressive if we consider that the index had spent three years doing time correction. 

If we look at the given chart, Shanghai Composite looks very interesting. Shanghai Composite is trading at the lower end of the 25-year-old channel and in past, it had bounced back from these levels for three times generating multi-bagger returns.

It seems to me that China is on the cusp of a major change if these levels hold Shanghai composite can multiply 2X or 3X from current levels in the next 5 years.  The risk-reward ratio seems extremely attractive from current levels.

Summary

1.      Long on Shanghai Composite at 2679

2.      Stop loss below 1900
3.      The target of 5000+ levels the over the next five years.