hang seng index retreated from weeklymedium term resistance at 21000 1803852016

(Click to enlarge charts)

What happened earlier/yesterday

The Hong Kong 50 Index (proxy for the Hang Seng Index futures) has did another “fake rebound” above 20740 intermediate resistance and staged to a push towards the 21000 weekly medium-term pivotal resistance (click here for a recap on our weekly outlook/strategy), where it printed a high of 20994 in the U.S. session before it staged a retreat at the closing session at 11.45 pm, Singapore time.

Key elements

• Yesterday’s push up in price action is considered as a “whipsaw” as it has reintegrated back below the pull-back resistance of the ascending channel’s bearish breakout.
• The daily (medium-term) RSI oscillator has staged another retreat from its resistance the third time. This resistance on the RSI has capped previous advance in the price action of the Index (highlighted by the pink ovals).
• The first short-term support now stands at 20670 (a congestion level from the minor swing highs area of 22/23 March 2016) which is appearing to be vulnerable. The corresponding hourly RSI oscillator has broken its parallel trendline support which indicates a built-up in downside momentum and it still has ample room before reaching its oversold region.
• The next short-term support rests at the 20390/270 zone which is defined by yesterday’s gap up and the minor swing low area of 29 March 2016 @9pm.

Key levels (1 to 3 days)

Pivot (key resistance): 21000 (weekly/medium-term)

Supports: 20670 & 20390/270

Next resistance:  22300

Conclusion

Technical elements are still bearish despite yesterday’s rally and most importantly, the Index is still below the weekly/medium-term pivotal resistance of 21000. Short-term price action is now oriented to the downside for a further potential slide to test 20670 before targeting the next support at 20390/270.

On the other hand, a daily close above the 21000 weekly/medium-term pivotal resistance is likely to invalidate our medium-term bearish view to see an extension of the countertrend rally to propel the Index higher towards the next resistance at 22300.

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