While global equity benchmarks have trended higher this year, Chinese equities have experienced severe relative divergence and remain largely overlooked by broader market sentiment. That could present buying opportunities for discerning investors.
The benchmark iShares China Large-Cap exchange-traded fund (ticker: FXI) has declined 11% year to date, standing in stark contrast to the S&P 500, which has advanced 14% to touch new all-time highs. The sustained underperformance of Chinese stocks has compressed valuations to deeply depressed levels, laying the groundwork for a potential value opportunity.
Tech optimism received a surprise catalyst over the weekend after Chinese memory-chip maker CXMT announced major architectural progress on its DRAM chips, targeting commercial shipments by year end. The news triggered an immediate 4% gap-down in Micron, underscoring China's relentless semiconductor push despite strict Western export controls.
This technological progress highlights a potential early fundamental catalyst for Chinese technology ETFs such as the KraneShares CSI China Internet ETF (KWEB), paving the way for a potential mean-reversion trade after an extended period of neglect. Let's examine its daily chart to find possible upside.
The KWEB currently trades 41% below its 52-week peak, with top holdings dominated by megacap internet platforms such as Alibaba, NetEase, and JD.com. The fund has logged declines in seven of the past nine weeks, drawing back toward a high-conviction support band in the $23.00-$25.00 zone, a key demand level that anchored prices throughout 2022-2024 and again during the June 2026 pullback.
Looking at KWEB's daily chart, a clear bullish relative strength index divergence has developed, marked by a higher RSI low across September and October even as absolute price action printed a lower low. This momentum divergence frequently signals waning downward pressure and foreshadows a potential positive trend reversal. That shift is further reinforced by a developing double-bottom structure that aligns with a June 29 bullish island reversal, which recorded a 1.5% gap-up just days after a 3% gap-down on June 25.
Price action cleanly filled that late-June gap in early October before completing a second bullish island reversal on October 5, surging 3% on expanding volume. A doji candle the following session confirmed localized bottoming support, setting the stage for a powerful 4% gap-up on October 9 supported by twice the average daily volume.
With shares now consolidating tightly within that high-volume range, the daily chart presents a compelling, high-conviction risk/reward setup. One could enter here, and this fund could reach $30 by early 2027, a 21% gain from current prices. Remain bullish above $23.
The KraneShares CSI China Internet ETF was trading around $24.40 Wednesday.
Turning to the monthly chart, its ratio chart against the S&P 500 illustrates a severe, multi-year relative downtrend dating back to early 2021. That historical decline initiated with a gravestone doji candle in February 2021 directly at the very round $100 level, which served as the center candle of a major bearish evening star top, ultimately driving the fund to a low of $17.22 in October 2022.
Despite this prolonged weakness, the fund has built an extensive long-term accumulation floor above those prior lows. Structural support has been repeatedly validated by key candlestick signatures: a cluster of three consecutive monthly bullish hammers between March and May 2022, a bullish harami in February 2024 paired with a March spinning top, and a high-conviction bullish engulfing candle this past July.
While the fund has lacked multi-month trend persistence -- failing to log back-to-back monthly gains since a five-month winning streak in mid-2025 -- this multi-year bottoming structure sets up a favorable risk-managed entry. As domestic markets remain wobbly, a rotation into Chinese names may be the next logical move.
Doug Busch is the senior technical analyst at Barron's Investor Circle. His technical view is added to stock picks, including those published exclusively for Investor Circle readers. A glossary of technical terms is updated regularly with new entries.
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