China’s remorseless stock selling to lead to more

Shanghai and Shenzhen markets halted after falling 7%

The Straits Times reports

SHANGHAI – Trading on the Shanghai and Shenzhen stock markets was halted for the day on Monday (Jan 4) after shares fell seven per cent.

The drop in the CSI300 index, which covers both bourses, for the first time triggered an automatic early closure under a new system to curb volatility, after an earlier 15-minute trading halt failed to stem the declines.

Under the mechanism which coincidentally took effect on Monday, a move of 5 per cent in the CSI 300 triggers a 15-minute halt for stocks, options and index futures, while a move of 7 per cent close the market for the rest of the day. China introduced the stock-market circuit breaker to help calm volatility after last year’s summer rout sent price swings in the benchmark index to 18-year highs.

Shanghai Shenzhen CSI300 Index is a stock market index designed to replicate the performance of 300 stocks traded in the Shanghai and Shenzhen stock exchanges.

 

Market halted twice all in less than 30 minutes

Apparently from resumption of trading after a 15 minute break, the market hit 7% marker 6 minutes later. From DaZhihui

导读:2016年元旦后首个交易日,A股遭逢暴跌,下午开盘后不久,沪深300指数接连触发2档阀值,于13:33结束了当天交易。

2016年元旦后首个交易日,A股遭逢暴跌, 13:12,沪深300指数下跌达5%,达到第一档熔断阀值,暂停交易15分钟。13:27,恢复交易。

仅仅6分钟后,上交所发出了2016年的02号公告。

也就是说,从下午开盘到13时33分(其中还有15分钟暂停交易),沪深300相继触发了两档熔断,5%和7%,按照规则,全天任一时间段触及7%,则暂停交易至收市。

注:熔断阈值为5%和7%两档,指数触发5%的熔断后,熔断范围内的证券将暂停交易15分钟;但如果尾盘阶段(14:45 至15:00期间)触发5%或全天任何时间触发7%,将暂停交易至收市。

Translation:

  1. A shares fell sharply.
  2. At 1:12 pm, CSI300 down 5% which triggered a 15 minute break.
  3. Trading resumed at 1:27 pm.
  4. 6 minutes later at 1:33 pm, CSI down 7% which triggered halt to trading for the day.

 

No-remorse selling, no covering

CSI300 closes early after 7% loss on first trading day of 2016

CSI300 closes early after 7% loss on first trading day of 2016 | Source: 大智慧

If intraday is a guide, this bearish action is going to follow through.

  1. If the earlier action is a result of short selling, we are likely to see some short covering after the first 15 minute halt.
  2. Without retracement, market resumed falling with falling index-rising volume in all of 6 minutes.

This kind of remorseless selling with high participation is going to lead to some more. Finally note what I wrote about Shanghai Composite back in October 2015 (hint: also about high volume).

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Soh Tiong Hum is Director of TerraSeeds Market Technician Pte Ltd. TerraSeeds is a trading educator in Singapore since 2005. Soh Tiong Hum is a member and regular speaker at Technical Analysts Society Singapore events and has a bi-monthly lunch time event at IG Singapore on forex and stock markets. He is an avid blogger on technical analysis topics; his Twitter account @sohtionghum was ranked #23 out of The Top 70 Twitter Accounts To Follow In 2015 by MahiFX. Come find Tiong Hum on Google+
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