$AIR CHINA(00753)$  The moment I have been watching and waiting for has finally arrived. I have been watching Air China closely in the last few days as I can see the chart is on the verge of forming something interesting of note. 

If you take a look at the first chart, in the main chart, you can probably noticed on the right of the chart, the share price of Air China has been doing a'ding-dong', like some sort of a dance. This is known as the typical consolidation phase after a great surge from ¥5+ around November - December last year. 

The surge occurred after the chart completed an inverted head and shoulders pattern and the trend reversed upwards. Such a surge typically uses up a lot of energy. We can see this in the sub-charts. The MACD surges towards positive and the RSI indicators demonstrated oversold territory on all 3 timeframes (RSI 6,16,24). 

If you do not know what I am referring to for RSI, please refer back to my discussions in the past few days (see eg. using Wuxi Bio and HSBC, which I have attached both charts below for further reference. Do read back the articles if you need further clarification. There are also linked to another introduction piece on RSI indicators as well as a fellow contributor on using MACD indicator.)

Back to Air China. After a period of consolidation, it is obvious two things must happen. Either the chart breaks higher or lower [Happy] [Surprised] [Sly] . Yes, but typically a consolidation phase chart would break towards the same direction as before the consolidation begins. The idea is simple, 🐂 and 🐻 struggle against each other. The one with more energy wins. Given that there was an increasing participation rate (increasing volume) during the the last leg up, a lot of people have committed. Obviously, these people want the 🐂 to win. Consolidation takes place to rid of those weak holders. Once there is no one left to sell, the 🐂 wins and breakout occurs. 

This is just early days. No one knows for sure if the breakout is real. False breakout at this stage could still happen to surprise the 🐂. This is not uncommon. If it does happen, the drop will be rapid as well as suddenly everyone holding on to the shares want to be the first one to get out to preserve their capital. Let us monitor Air China in the next few weeks and see how this plays out.

Back to the background. A lot has sure been going on in the background for Air China. Chief among all is the sudden removal of zero COVID restrictions in China. People started travelling as well as falling sick. As the majority of the population was not exposed to COVID, the spread is seemingly fast. So, there is a struggle between opening up and getting people back from sickness. Add to that rush is the impending Lunar New Year occurring next weekend. The rush to go home from all over China adds to this stress.

China will eventually overcome COVID 🌊, like the rest of the world, as long as the leadership see it through. I am sure they are intelligent enough to see that. When that happens, transport firms like Air China will recover and travel boom will arrive again. Air China stands ready to benefit from this subsequent travel revenge seen all over the world when COVID restrictions were removed.

Lastly, another reason for including the two charts on Wuxi Bio and HSBC are just to illustrate that with RSI indicators, correction is not immediate. A breakout to the upside can still occur! This is very important to know. As we look again at the sub-charts of MACD, we will notice that MACD continues to trend higher, meaning that the likelihood of an uptrend is intact and a breakout is possible for both. I did not mention MACD in my last write-up as I was focusing on sharing the idea of RSI indicators and wanted to avoid confusion.

What could happen next for these two companies shares prices are to ramp up further until the chart indicators tell otherwise. Yes, they are both in overbought positions and corrections are imminent. But this correction could take place at a much higher price point. With increasing volume in both signal higher participation. This creates more momentum, energy and greater greed. These add up to push the stock prices up... Till new players come in and all come crushing down... Leaving the new players to hold the baby... So be careful if you trade the upside. You can still do that. Just need to be aware when to leave the party.

This leads to another trading method of buy high, sell higher. But I have written too much and perhaps if keen, a sharing for another day.

Please feedback if you like this sharing. Love or hate, do let me know. I learnt a lot from discussion and feedback. Do remember to read the article on HSBC if you have not done so. I noticed quite a number read Wuxi Bio but only a few read the article on HSBC. They are different examples to show the same concept of RSI indicators. Hope you feel that I have contributed to your learning.