Last week the Shanghai Composite Index turned in its worst performance since the financial crisis, dropping 13.3%. The talk in the news and in many investment circles is whether this marks the beginning of a more serious decline.
The usual suspects are spending time giving lip service to topics like central bank actions, short-term money rates, liquidity factors, etc. But none of these factors or pundits will tell you, the investor, exactly what you should do or when you should do it.
The chart of the SSE Composite, on the other hand, is very clear on this last point. It’s a BUY. It’s a buy, right now.
The index has dropped to test a clear zone of support at 4250 -4500 that skilled traders and investors have had on their radar for at least a month.
Buying the SSE Composite Index on this test to support provides the lowest risk entry for a continuation to the upside and is a good reward to risk trade.
If a reversal back to the upside does not occur, the loss is minimal. However, if the larger uptrend re-asserts itself here and the index rallies back to the upside, the reward will be handsome measured against the risk.
Being able to discern a ‘good bet’ has everything to do with having a rock solid methodology that has a real, mathematical edge. It’s not the only thing that leads to successful investing and outperformance but it is where it starts.
