hang seng daily outlook fri 11 mar 2016 approaching 20380520 risk zone with excess at 20800 where a

(Click to enlarge charts)

What happened yesterday/earlier

In our previous short-term daily outlook/strategy published yesterday (click here for a recap), we highlighted that the Hong Kong 50 Index (proxy for the Hang Seng Index futures) is in the midst of shaping a potential push up towards its significant resistance zone at 20380/520.

In this morning session, the Index has recovered from yesterday’s post European Central Bank (ECB) induced sell-off and printed a current high of 20179 as at 12pm (Singapore time).

Key elements

• Current price action is now approaching our medium-term risk zone at 20380/520 which is defined by the former swing lows area of 24 August 2015 and 29 September 2015, upper boundary of the bearish descending channel in place since 26 May 2015 high and a Fibonacci cluster.
• In conjunction, the daily (medium-term) RSI oscillator is also coming close to its horizontal resistance where the price action of the Index has been capped and staged a decline thereafter in the past two occasions (highlighted by the pink ovals).
• Above 20380/520 stands a next resistance of 20800 which is defined by the upper boundary of the bullish ascending channel in place since the start of the countertrend rally cycle from 11 February 2016 low of 18056 and a Fibonacci projection cluster.
• The hourly (short-term) Stochastic oscillator is turning up and still has some room left for further potential upside before reaching its extreme overbought level. This observation gives credit for a potential “final” push up in price action of the Index.

Key levels (1 to 3 days)

Intermediate resistance: 20380/520

Pivot (key resistance): 20800

Support: 19790/600

Next resistance: 22300

Conclusion

The Index is now approaching a critical risk zone at 20380/520 where a potential decline may occur. As long as the excess at 20800 (pivotal resistance) is not surpassed, the Index is likely to see a slide back to retest the lower boundary of the ascending channel and gap support at 19790/600.

On the other hand, a clearance above the 20800 pivotal resistance may see the continuation of the countertrend rally to target the next resistance at 22300 in the first step.

Disclaimer

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. City Index 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 further 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.cityindex.com.au, 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. GAIN Capital Australia Pty Ltd (ACN 141 774 727, AFSL 345646) is the CFD issuer and our products are traded off exchange.