hang seng index daily outlook for thurs 09 july pull back towards 23900 support before potential fur

(Click to enlarge chart)

What happened yesterday

The Hong Kong 40 Index (proxy for the Hang Seng Index) has broken below the 23600/23500 long-term key support at the close of the Hong Kong trading session but it managed to recover and registered a daily close of 23589 during the overnight session at 11.45pm (SGT)

Please click on this link for a recap on our previous daily outlook.

Key elements

• Price action tested but managed to hold above the long-term key support at 23600/23500 which is the lower boundary of the long-term ascending channel in place since 26 October 2008 low (cyclical bear market bottom) (see weekly chart).
• Price action has broken above the short-term 20-hourly Moving Average (in red) that has acted as a resistance for the Index since 03 July 2015 high @1pm previously.
• The 20-hourly Moving Average (in red) is now acting as support at around 23900.
• The  hourly Stochastic has reached its extreme overbought level which highlights the risk of an imminent pull-back in price action of the Index.
• The significant short-term resistance is now at 24720/24850 follow by 25500 next which is the trendline resistance joining the highs since 24 June 2015 @9pm
• The 61.8% Fibonacci retracement of the recent short-term up move from 08 July 2015 low @3pm to the current 09 July 2015 high @10am stands at 23450

 Key levels

Intermediate support: 23900

Pivot (key support): 23450

Resistance: 24720/24850 & 25500

Next support: 22550

Conclusion

Technical elements are now advocating for a recovery. Expect a pull-back first towards the intermediate support at 23900 with a maximum limit set at the 23450 daily pivotal support before a further potential push up to test the 24720/24850 resistance zone.

On the other hand, a break below 23450 is likely to invalidate the expected recovery scenario to see a further slide to target the next support at 22550.

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