hang seng daily outlook wed 15 june 2016 targetsupport reached at 20100 potential minor rebound in p

(Click to enlarge charts)

What happened earlier/yesterday

The Hong Kong 50 Index (proxy for the Hang Seng Index future) has continued to inch lower and the expected bearish breakout from the “pennant” configuration as per highlighted in our prior short-term technical outlook/strategy (click here for a recap).

In today’s morning session (15 June 2016), the Index has gapped down and hit the predefined short-term downside target/support at 20100, reinforced by the MSCI Inc’s decision not to include China A shares into MSCI’s benchmark indexes for a third time

Key elements

• Current price action has started to stage a rebound from the 20100  support level which is defined by the former minor swing high areas of 12 May/17 May 2016 and now a Fibonacci cluster.
• The hourly (short-term) Stochastic oscillator has flashed a bullish divergence signal and exited from its oversold region. These observations suggest that short-term downside momentum has started to wane and the price action may now see a “snap-back” rally.
• The short-term resistance to watch will be the 20740/820 zone which is defined by a confluence of elements (the gap resistance, pull-back resistance of the former short-term ascending channel’s support and the 50%/61.8% Fibonacci retracement of the recent decline from 08 June 2016 high of 21407 to the current intraday low of 20094).

Key levels (1 to 3 days)

Intermediate support: 20320

Pivot (key support): 20100

Resistance: 20740/820

Next support: 19560

Conclusion

The recent decline from 08 June 2016 high of 21407 is now due for a potential “snap-back” rally. As long as the short-term pivotal support at 20100 holds, the Index is likely to see a further rebound to retest the 20740/820 resistance before another round of potential downleg sets in.

However, failure to hold above the 20100 short-term pivotal support is likely to invalidate the “snap-back” rally scenario to open up scope for a further decline towards the second expected medium-term downside target/support at 19560 as per highlighted in our latest weekly technical outlook/strategy.

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