China Hongxing: Another S-chip bites the dust.

Flipping through the latest issue of The EDGE, I found a full page write up on China Hongxing.  It is rather negative with a title like "China Hongxing unveils plan for cash pile, but analysts fear it is coming too late".

"China Hongxing's fast growing cash pile has been a source of consternation for investors for more than a year.  Some were irked by the company's apparent refusal to invest the money or return it to investors... Some were even concerned whether it actually had the cash reflected in its accounts."

Analysts are downgrading the prospects of the company en masse despite the company reporting a net cash position of 22c per share.  The share price closed at 14c on 5 March.  CIMB-GK and Kim Eng Securities even ceased coverage of the company altogether.

I decided to take a look at China Hongxing's charts.  Looking at the MACD, it is in negative territory, pulling away downwards from the signal line. The MFI has dipped into the oversold region and formed a lower high, signalling negative buying momentum. 

I have drawn the downtrend channel for China Hongxing in light green. 14c is currently at the channel support.  However, if this breaks, the next support is at 12c and a stronger one is at 10c.  Any upmove from 14c is likely to be just a rebound from oversold conditions and would meet with resistance at 16c, thereabouts, which is provided by the descending 20dMA.  If, in the unlikely event that the 20dMA is taken out, very strong resistance is provided by a confluence of the 50d, 100d and 200d MAs, which are at 19c, thereabouts.