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The Shanghai Composite continues to surge higher as today has broken above the 3288 2019 high to confirm an important medium-term base. The Credit Suisse analyst team maintains a bullish outlook with next resistances at 3485/87 and then at 3587.

Key quotes

“Momentum continues to accelerate strongly, with the daily RSI now reaching the highest level since 2014, suggesting a real possibility that we are moving into a ‘bubble’ phase similar to the 2014 blowup. Reinforcing this view is the three successive extremely bullish ‘Marubozu’ candlesticks and the breaks above the January 2020 high at 3127 as well as the 3288 April 2019 high, which completes a multi-year basing structure for the market.”

“Next minor resistance is seen at the 78.6% retracement of the 2019/20 fall at 3334/42, then the 38.2% retracement of the 2015/2019 fall at 3485/87. Given the size of the base though, a test of the 3587 high and eventually beyond here seems likely in our view.”

“Near-term support moves to the 3188 gap, which ideally floors the market.”