hang seng daily outlook thurs 07 jan 2016 at rangeexpanding wedge support for a potential minor rebo
<p>(Click to enlarge charts) What happened yesterday The Hong Kong 40 Index (proxy for the Hang Seng Index) has hit the expected downside target at […]</p>
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What happened yesterday
The Hong Kong 40 Index (proxy for the Hang Seng Index) has hit the expected downside target at 20700 in the overnight U.S. session. Please click on this link for a recap on our previous daily outlook/strategy.
Key elements
- This morning session sell-off has led the Index to test the lower boundary (support) of the “Expanding Wedge” in place since 23 October 2015 high at 20290.
- The 20290 support also confluences closely with the range bottom formed during the “Black Monday”, 24 August 2015 to 29 September 2015 period and 1.00 Fibonacci projection of the down move from 26 November 2015 to 14 December 2015 projected from 24 December 2015 high.
- The 4 hour (short-term) Stochastic oscillator has reached its oversold region with a bullish divergence signal. This observation suggests that the strength of the current downside momentum has started to abate.
- The intermediate resistance zone now stands at 20740/21040 which is defined by a trendline resistance that links the lower highs since 30 December 2015 @9am and the 23.6%/38.2% Fibonacci retracement of the steep down move from 24 December 2015 high to the current low of 20260.
Key levels (1 to 3 days)
Pivot (key support): 20200
Resistance: 20740/21040
Next support: 20070
Conclusion
The current down move of the Index has reached the upper limit of our second medium-term downside target at 20290 (please click on this link to recap our weekly outlook/strategy).
Current technical elements are advocating at least a minor rebound in price action. As long as the 20200 pivotal support holds, the Index may see a potential push up to target the intermediate resistance zone at 20740/21040.
However, a break below the 20200 pivotal support may see a further decline to test the “Black Monday”, 24 August 2015 low at 20070.
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