hang seng daily outlook tues 05 apr 2016 further potential downside below 2029020520 resistance 1804

(Click to enlarge charts)

What happened earlier/yesterday

The Hong Kong 50 Index (proxy for the Hang Seng Index futures) has gapped down in line with the downside reaction seen in the U.S. major stock indices where the S&P 500 reacted closely just below the 2081 key medium-term resistance.

Key elements

• Key short-term resistance for the Hong Kong 40 Index now stands at 20520 which is defined by the trendlline resistance that has linked the lower highs since 30 March 2016 high of 20988, minor swing high of 01 April 2016 @11pm.
• The short-term (hourly) Stochastic oscillator remains oriented to the downside and still has room for further potential downside before reaching its extreme oversold level.
• The next significant support rests at 19800 which is defined by the swing lows area of 03/09/11 March 2016 and the 38.2% Fibonacci retracement of the prior countertrend rally from 12 February 2016 low to 30 March 2016 high of 20988 (please click on this link for more details as per highlighted in our latest weekly strategy/outlook published yesterday).
• Interestingly, the 19800 level now confluences closely with a 1.00 Fibonacci projection of the recent decline from 30 March 2016 high at 20994 to 01 April 2016 low at 20290 projected from 01 April 2016 high @11pm (an extended 5^th wave target based on the Elliot Wave Principal).

Key levels (1 to 3 days)

Intermediate resistance: 20290

Pivot (key resistance): 20520

Support: 19800

Next resistance:  21000 (weekly/medium-term)

Conclusion

As long as the 20520 daily short-term pivotal resistance is not surpassed, the Index is likely to shape a potential direct drop towards the 19800 support before a potential minor rebound/consolidation sets in.

On the other hand, a clearance above the 20520 short-term pivotal resistance is likely to negate the bearish tone to see a push up for a retest close to the 21000 weekly pivotal resistance.

Disclaimer

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this email, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs. All queries regarding the contents of this material are to be directed to City Index, a trading name of GAIN Capital Singapore Pte Ltd.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit cityindex.com.sg for the complete Risk Disclosure Statement.