While the major markets have been getting rocked, Xinyuan Real Estate, our favorite little stock here at Whacko Trader, has been rocketing.
Here is the latest daily chart with some notations which will be discussed below.
As we had noted a few weeks ago, prior to the "surge", XIN was setting up a potential inverse head and shoulders reversal with a neckline around 3. It appears based on the last few days of price and volume action, as can be seen in the chart, that the head and shoulders pattern has completed.
The likeliest move from here is to a completion of the move to XIN's prior highs. As shown on the chart, this will likely either be a straight shot up, or a retest of the neckline before a more prolonged move up. But based on the clearance of the neckline with substantial volume, as well as a quick breach of the 38.2% fibonacci (which was retested this morning).
Also, fibonacci levels appear to have been very crucial for trading XIN recently, which surged up to around the 23.6% retracement (not shown in the chart) before retesting the 38.2% as noted.
However, one should keep in mind these longer-term inverse head and shoulder patterns that we discussed earlier in the year. It is possible that one of these larger patterns has yet to complete (or fail) and that what we are seeing right now is just short-term noise in a thinly traded stock.
Disclosure: Long $XIN