hang seng index short term pull back before new potential upleg 1821122016

Daily Outlook, Wed 13 July 2016

(Click to enlarge charts)

What happened earlier/yesterday

The Hong Kong 50 Index (proxy for the Hang Seng Index futures) has staged a bullish breakout from its former “Triangle range” sideways configuration in place since 21 April 2016 high. Positive price action configuration

Today’s key China/Hong Kong economic data releases & event

• China Trade Balance (USD) for Jun @700GMT (46.64bn consensus)
• China Exports (y/y) for Jun @700GMT  (-4% consensus)
• China Imports (y/y) for Jun @700GMT  (-5.0% consensus)

Key elements

• The pull-back support of the former upper boundary of the “Triangle range” bullish breakout now stands at 21100.
• In the short-term, the Index is now evolving within a short-term bullish ascending channel in place since 27 June 2016 low. The lower boundary (support) of the ascending channel now rests at 20830 which also confluences with the minor swing low area of 11 July 2016.
• The upper boundary (resistance) of the ascending channel stands at 22090 which is also defined by the 1.00 Fibonacci projection from 27 June 2016 low.
• The 1 hour Stochastic oscillator has exited from the overbought region and still has room for further downside before reaching the extreme oversold level. These observations reinforce the risk of a further short-term pull-back.

Key levels (1 to 3 days)

Intermediate support: 21100

Pivot (key support): 20830

Resistances: 21650 & 22090

Next support: 20320

Conclusion

Short-term pull-back/consolidation in progress before new rise. The Index may now see a further decline towards the intermediate support at 21100 with a maximum limit set at the 20830 daily short-term pivotal support before another potential upleg materialises to target the resistances of 21650 follow by 220960.

On the other hand, failure to hold above the 20830 short-term pivotal support is likely to invalidate the earlier bullish breakout from the “Triangle range” and see reintegration back into the range to test the next support at 20320 in the first step.

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