Don't Ignore This Chart!

Chinese Holdings Weigh on Global X Social Media ETF

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The Social Media Global ETF (SOCL) fell sharply on Monday to signal a continuation of the prior decline. The chart below shows SOCL breaking support with a sharp decline in late June and early July. This is the break that broke the bull's back. Notice how the ETF formed a lower high in early June and broke below the May low in early July. The subsequent bounce in mid July retraced 62% of the prior decline and carried the ETF back to the 50-day SMA. This is normal for a retracement and the 50-day acted as resistance. With a sharp decline the last few days, a lower high formed and the bigger downtrend is continuing. Chartist can now mark resistance at the mid July high. I show the three culprit stocks after the jump. 


Click this image for a live chart


Chinese stocks were hit hard on Monday and three Chinese components are weighing on the Social Media Global ETF (SOCL). The chart below shows Tencent Holdings (TCEHY), NetEase (NTES) and Sina.com (SINA), three stocks that account for around 20% of the ETF. Tencent peaked in April, formed lower highs in mid July and fell sharply the last three days. NetEase is the strongest of the three, but the stock fell sharply from resistance near 150. Sina.com surged to the 60 area and then gave most of these gains back with a sharp decline to 40. All three are below their 50-day moving averages. 


Click this image for a live chart

Arthur Hill
About the author: , CMT, is the Chief Technical Strategist at TrendInvestorPro.com. Focusing predominantly on US equities and ETFs, his systematic approach of identifying trend, finding signals within the trend, and setting key price levels has made him an esteemed market technician. Arthur has written articles for numerous financial publications including Barrons and Stocks & Commodities Magazine. In addition to his Chartered Market Technician (CMT) designation, he holds an MBA from the Cass Business School at City University in London. Learn More
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