hang seng daily outlook thurs 11 feb 2016 bearish tone remains intact below 18810 resistance 1796752

(Click to enlarge charts)

What happened earlier

The Hong Kong 50 Index (proxy for the Hang Seng Index futures) has reopened today after a three days break from the Lunar New Year holidays. It has gapped down and printed a current intraday low of 18271 which is almost close to our expected medium-term target set this week at 18200. Please click on this link for a recap on our latest weekly outlook/strategy that was published last Sunday.

Key elements

• The Index is still evolving within a bearish descending channel in place since 26 May 2015 with its lower boundary (support) at 16100 (see daily chart).
• The daily RSI oscillator remains bearish below its resistances and still has room for ample downside potential before reaching its oversold region. This observation suggests that medium-term (1 to 3 weeks) downside momentum remains intact.
• The next short-term support after 18200 rests at 17800 which is defined by the 1.618 Fibonacci projection of the down move from 11 February 2016 high to 03 February 2016 low projected from 05 February 2016 high @9am.
• The hourly Stochastic oscillator has almost reached its extreme oversold level which highlights the risk of a “relief rebound” at/around the 18200 support.
• The significant short-term resistance to watch will be at 18810 which is defined by the former swing lows area of 26 January and 03 February 2016.

 Key levels (1 to 3 days)

Pivot (key resistance): 18810

Supports: 18200 & 17800

Next resistance: 19300/400

Conclusion

The Index continues to trade within a medium-term bearish trend. Any potential relief rebound is likely to be capped by 18810 short-term pivotal resistance for a further potential decline to target 18200 before 17800.

On the other hand, a break above the 18810 pivotal resistance is likely to negate the bearish tone for a further rebound towards the trendline resistance that has linked the lower highs since 29 January 2016 now at 19300/400.

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