I trade financial markets, so I appreciate it when the media talks down a stock that is showing a price pattern associated with a breakout from a downtrend. The negative talk in the financial media means I can buy the stock at an even lower price.
The same applies to much of the economic commentary about China. The doomsayers would have us believe the Chinese economy is collapsing because it has no inflation, its housing industry is (as it has been for the past three years) teetering on the edge of catastrophic collapse, annual growth figures are falling and the Foreign Minister has not been seen in public for many days.
All such terrible news. In this case, I am not assessing this commentary against a price chart pattern. I am assessing this doom-and-gloom coverage against the renewal of my Chinese contracts on improved terms, juggling requests to speak in an invigorated resurgent conference environment and approving proposals to do new print runs for my books and translate another. These activities are all related to Chinese financial markets, which are consigned to a particular level of doom in foreign media commentary.
It’s not just me. The on-the-ground experience is at odds with the general media coverage. New players are engaging, and unfortunately, falling into the same errors and concerns that new players seem unable to avoid in China.
One of these concerns is about theft of intellectual property, including brand names. Books can be reprinted in an instant. I have come across a number of counterfeit copies of my books in China. I love it.
The counterfeiters have wonderful distribution chains so my books reach an even wider audience. This illicit audience will pay to attend conference events where I speak, so instead of an audience of 300, I might speak to an audience of 3,000. With that comes the opportunity to deliver products and services that have a much higher value than book royalties.
See also: China tightens securities lending rule to support stock market
For me, the pirated books are free advertising, although my Chinese publishers do take strong action against them. It is an approach that may not suit everybody, but the strategy remains viable across many categories.
In China, copyright and brands belong to the first to register them in the country. If you have a branded product you want to sell in China, it is essential that you move quickly to register the brand as a trademark. The first to register owns the brand in China, irrespective of whether the brand is registered elsewhere in the world for years prior.
Failure to register is not just a rookie mistake. Big name brands from Europe and the US have made the same mistake. Some have had to repurchase their brand name from the individual who first registered it in China. This is a path better avoided by ensuring you are the first to register your brand.
See also: Eight reasons why I am still in favour of China stocks
This will not stop counterfeiters selling your “branded” goods online. I have seen pirated copies of my products sold on eBay and it’s a long and complicated process to get it stopped.
Not so in China. Under new regulations, all sales of your brand will be credited to you as the registered brand owner, and not to the counterfeiter who has advertised the goods. The largest online platforms are the first to implement this policy, but it also applies to the smaller platforms.
It is not a complete answer to copyright theft. Counterfeiting may never stop, but there are ways to use it to boost legitimate sales and business development in what is, despite some commentary, a vigorous market and economy.
Technical outlook for the Shanghai market
The Shanghai index continues its downtrend with its inability to stay above the upper edge of the long-term group in the Guppy Multiple Moving Average (GMMA) indicator. The retreat is important because it confirms a change in the analysis of the market.
Prior to this retreat, traders were watching for the development of a GMMA 1-2-3 breakout pattern. The idea was that this most recent rally in area A would act as part 2 of the pattern. The next rally was to carry the short-term GMMA above the upper edge of the long-term GMMA before collapsing again. This was the development that would confirm the potential for a trend change.
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The breakout failed.
Instead, the retreat allows the placement of a simple downtrend line. It does not start from the absolute high near 3,400. It is an intermediate trend line that joins the May highs with the June rally peak and the recent July rally peak. This gives three anchor points for the trend line. It has become the dominant feature on the chart. Any change in trend will need to move above and stay above this downtrend line.
In the short term, the market has a high probability of falling towards support near 3,150. This support level was tested in June. There is a minor support level near 3,195 but this has no historical veracity. In contrast, the 3,150 level has previously acted as a support or resistance feature in previous major trend moves.
A rebound from 3,150 and a breakout above the downtrend line are strong bullish signals. The continued oscillation around 3,280 gives hope for some bullish pressure.
Meanwhile, a retreat from the downtrend line and a fall below support near 3,150 are very bearish and show downtrend continuation.
It is too early to call either bullish change or bearish continuation. The new downtrend line effectively defines the trigger points for trend continuation or trend change. This lack of trend clarity makes for adventurous trading.
Daryl Guppy is an international financial technical analysis expert. He has provided weekly Shanghai Index analysis for mainland Chinese media for two decades. Guppy appears regularly on CNBC Asia and is known as “The Chart Man”. He is a former national board member of the Australia China Business Council
