Are A Few Asian Markets Ready To Breakout?

I was scrolling through Business Insider’s “Most Important Charts In The World” when I came across this chart from Jeff Gundlach that caught my eye. The chart is the Shanghai Composite Index (China’s main stock index). Mr. Gundlach is basically highlighting the coiling pattern that has developed over the past few months. In fact, if you zoom out, there’s a bigger pennant pattern forming on the weekly chart. Let’s take a look.

$SSEC – Shanghai Composite Weekly Chart

As you see, the little pennant/symmetrical triangle pattern that Gundlach highlighted is in fact inside of a bigger one. This makes this chart even more interesting. Combine that with the fact that RSI has gotten very tight and that two weeks ago, the ATR printed it’s lowest reading (of 42.6) since April of 2006…I like the potential for volatility to pick up. While a pennant pattern is  neutral, I like this play to the long side just because of the risk/reward.



In fact, let’s take a look at the ETF for China. As you can see, there’s a very similar pattern – and in fact, we’re seeing a breakout occurring as we speak.

$FXI Weekly Chart

FXI weekly


There are a few more markets there interest me. Let’s take a look at South Korea.

$EWY Weekly Chart

Again, you see a similar pennant pattern but this one is a little more wider. Also, although the breakout attempt does seem to be messy, I like two things about this chart. For starters, the breakout is holding in a tight pattern. If this gets over 66, I can see it making a run to 70 quickly (it’s 2011 high) and eventually it’s 2008 high of 74-75. Lastly, I like that this is much closer to it’s 2008 high than the $FXI is.

EWY weekly


There are two more markets that interest me, but I think both need a little more consolidation here before they head higher.

$THD – Thailand Weekly Chart

There’s a few things I like here. For one, the ETF is not that far away from it’s all-time high, set a little over a year ago (that tumble is the “taper tantrum”). After over half-a-year of selling off, the index has made a nice recovery from the low which was set in the first week of the year. However, we’re up against some decent resistance here. A couple of weeks of consolidation and I like the breakout play over ~82 for a run to ~95 (and if it reaches that, might as well wait for the $100 roll). However, if this fails to get above 82 and breaks below this recent uptrend line, I’d be very wary about holding longs in this name.

THD weekly


$VNM – Vietnam Weekly Chart

This needs a little more consolidation before breaking out here.  I’d be skeptical if a breakout did occur after it ran 19 to 22 in a relatively quick manner.

VNM weekly




The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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