China is pursuing a zero-COVID policy, which means the discovery of a handful of cases can lead to the lockdown of entire provinces. Currently, Beijing is in lockdown and sections of Shanghai are also facing the same fate, just a week after being granted a reprieve from a 2-month restriction.
Shanghai’s index continues to react to the situation, gaining momentum after authorities said there were no serious cases during the city’s latest outbreak of COVID-19.
Shanghai Index Outlook
The corrective decline seen on the daily chart appears to have found support at the 3568 support line. Price action is trading within the range with this price level as its floor and 3636 as its ceiling. A break in the floor leads to further corrective movement, with 3490 (February 8 and February 28 highs) and 3413 (February 23 and March 3 lows) appearing as the initial targets to the south. An additional pivot comes into play as 3369 (Nov 30, 2021 and Jan 13, 2022 highs) but is only available if price action breaks below the 3413 support.
On the other hand, the reversal of the correction resumes when the bulls break above the 3636 ceiling. This action opens the way towards 3722 (March 14th and April 18th highs). Resistance at 3789 (March 28, 2022 and June 2, 2022 highs) awaits the bulls for further advance, leaving 3905 (May 11/19, 2022 highs) as another barrier to the north. Price activity needs to break above the April 27/May 10 double top to continue the uptrend.