hang seng daily outlook thurs 28 apr 2016 potential bearish bias remains watch the first support at

(Click to enlarge charts)

What happened earlier/yesterday

The Hong Kong 50 Index (proxy for the Hang Seng Index futures) has gapped up in the morning session and broke above the 21410/440 short-term pivotal resistance.

However, the Index did not manage to surpass the medium-term resistance zone of 21800/970 as per highlighted in our latest weekly outlook/strategy that was published earlier this Monday (click here to recap). It printed a high of 21649 before reversing down after the Bank of Japan’s no change in monetary policy stance.

Please click here for a recap on our on our previous daily short-term outlook/strategy.

Key elements

• Despite today’s morning push up in price action, the Index does not have a clear break above the pull-back resistance (in dotted purple) of the former “Ascending Wedge” bearish breakout (see 4 hour chart).
• The hourly (short-term) Stochastic oscillator has just exited from its overbought region which suggests that short-term downside momentum has resurfaced.
• The first near-term support stands at 21130 which is neckline of a minor top formed from the swing low areas of 20 April/26 April 2016.
• The next support rests at 21820 which is defined by the former minor swing high areas of 21/31 March 2016 and the 23.6%  Fibonacci retracement of the whole up move from 11 February 2016 low to last week high of 21648.

Key levels (1 to 3 days)

Intermediate resistance: 21450

Pivot (key resistance): 21800/970

Supports: 21130 & 20820

Next resistance: 22300

Conclusion

Despite today’s morning push up in price action, the Index has not managed to break above the medium-term resistance zone of 21800/970 and right now it has shaped a potential “minor top”.

Right now, it needs to break below the first support of 21130 (neckline of the “minor top”) to trigger a potential further decline to target the next support at 20820 in the first instance.

On the other hand, a clearance above the 21800/970 pivotal resistance is likely to invalidate the short-term bearish bias to see an extension of the multi-month rally in place since 11 February 2016 low towards the next resistance at 22300.

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