Featured Trade Bullish exhaustion seen in Hang Seng Index below key MT resistance

Short-term technical outlook on Hong Kong 50 (Fri 01 Feb)

Key technical elements

The Hong Kong 50 Index (proxy for Hang Seng Index futures) has challenged the predefined 28000 key medium-term pivotal resistance as per highlighted in our weekly technical outlook report published earlier this Mon (click here for a recap). The Index printed a high of 28215 in today, 01 Feb Asian opening session before it reversed down below the 28000 level.
Interestingly, the aforementioned price action’s negative reaction at the 28000 key medium-term pivotal resistance has occurred right at the upper boundary of an “Expanding Wedge” range configuration in place since 26 Oct 2018 low of 24487 (see 4-hour chart).
The hourly price action has formed a “Bearish Engulfing” candlestick pattern coupled with a bearish divergence signal seen in the 4-hour Stochastic oscillator at its extreme overbought level. These observations suggest that the upside momentum of the recent up move has started to wane.
The next significant near-term support rests at 27370 which is defined by the minor swing low area of 29 Jan 2019 and the 23.6% Fibonacci retracement of the entire up move from 03 Jan 2019 low to the key medium-term pivotal resistance swing high area of 28000/215.
An important point to highlight in terms of intra market analysis, the Hong Kong 50 Index (proxy for Hang Seng Index futures) is the outperformer among the major stock indices that we track where it printed its swing low earlier in 26 Oct 2018 versus the rest of the indices (S&P 500, Nasdaq 100, DAX, ASX 200) where their respective swing lows came in much later in 24/26 Dec 2018 before the rebound kick started on a global scale. Therefore, if the Hong Kong 50 Index continues to stage a further decline and break below the 26740 medium-term downside trigger, it may play a leading role to drag down the rest of the major stock indices into a fresh bearish impulsive down move phase.

Key Levels (1 to 3 days)

Pivot (key resistance): 28000/215 (excess)

Supports: 27650 & 27370

Next resistance: 29100

Conclusion

The Index has started to show signs of bullish exhaustion at the 28000 key medium-term pivotal resistance. Thus if it manages to hold at the 28000/215 (excess) resistance level, it is likely to stage a further potential slide to target 27650 follow by the next near-term support at 27370. A break below 27370 opens up scope for a further decline towards the 26740 key medium-term downside trigger level.

On the other hand, a daily close above 28000/215 invalidates the bearish scenario for a further corrective rebound towards the next resistance at 29100 (swing high area of 26 Jul 2018 & 61.% Fibonacci retracement of the recent down move from 29 Jan 2018 all-time high of 33530 to 26 Oct 2018 low.

From time to time, StoneX Financial Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.

As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.

FOREX.com is a trading name of StoneX Financial Pty Ltd.

The material provided herein is general in nature and does not take into account your objectives, financial situation or needs.

While every care has been taken in preparing this material, we do not provide any representation or warranty (express or implied) with respect to its completeness or accuracy. This is not an invitation or an offer to invest nor is it a recommendation to buy or sell investments.

StoneX recommends you to seek independent financial and legal advice before making any financial investment decision. Trading CFDs and FX on margin carries a higher level of risk, and may not be suitable for all investors. The possibility exists that you could lose more than your initial investment and CFD investors do not own or have any rights to the underlying assets.

It is important you consider our Financial Services Guide and Product Disclosure Statement (PDS) available at www.forex.com/en-au/terms-and-policies/, before deciding to acquire or hold our products. As a part of our market risk management, we may take the opposite side of your trade. Our Target Market Determination (TMD) is also available at www.forex.com/en-au/terms-and-policies/.

StoneX Financial Pty Ltd, Suite 42.01, 264 George Street, Sydney, NSW 2000 (ACN 141 774 727, AFSL 345646) is the CFD issuer and our products are traded off exchange.

Delayed London Stock Exchange (LSE) Data

The London Stock Exchange (LSE) market data displayed or referenced on this website is provided on a delayed basis and is not in real time. The delay period may vary but is typically at least 15 minutes. This data is intended for information purposes only and should not be relied upon for trading, investment, or other financial decisions. We do not guarantee the completeness, reliability, or suitability of the data for any particular purpose. Users should consult real-time data sources and obtain professional advice before making any financial decisions.