hang seng daily outlook fri 06 may 2016 short term rebound invalidated further potential decline bel

(Click to enlarge charts)

What happened earlier/yesterday

The Hong Kong 50 Index (proxy for the Hang Seng Index futures) has broken below the 20300 short-term pivotal support and invalidated the expected bounce towards 20790 (just printed a high of 20520) in yesterday’s Asian session.

Please click on this link for a recap on previous daily short-term outlook/strategy

Key elements

• The bearish impulsive wave of the medium-term bearish trend has resumed with the next significant support at 19850 (upper limit of this week expected medium-term target zone set at 19850/500, click here for a recap).
• The 19850 support is defined by the 50% Fibonacci retracement of the recent rally from 11 February 2016 low to 21 April 2016 high and the 9/11 March 2016 swing low areas
• The reintegration back below the 20600/300 former pull-back support (in dotted pink) has bearish implications as the bullish breakout seen on 13 April 2016 is considered as a failure which we are sceptical of it earlier based on intermarket analysis.
• The hourly (short-term) Stochastic oscillator is coming close to an extreme oversold region which the Index may see a slight rebound.
• The key short-term resistance stands at 20500 which is defined by yesterday minor swing high and close to the upper boundary of the short-term bearish descending channel in place since 28 April 2016.

Key levels (1 to 3 days)

Intermediate resistance: 20300

Pivot (key support): 20500

Support: 19850

Next resistance: 21000/115

Conclusion

Turn bearish and any potential rebound is likely to be capped by the 20300 intermediate resistance with a maximum limit set at the 20500 daily short-term pivotal resistance for another further decline to target the next support at 19850 in the first step.

On the hand, a clearance above the 20500 short-term pivotal resistance is likely to invalidate the expected bearish movement to see a corrective rally to retest the 21000/1115 neckline resistance of the minor “Toppish” configuration bearish breakout.

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