hang seng index weekly outlook 21 sep to 25 sep continues to be sandwiched within range configuratio

(Click to enlarge charts)

What happened last week

The Hong Kong 40 Index (proxy for the Hang Seng Index) has attempted to inch higher but failed to break above the 22400 significant resistance (printed a high of 22260 on 16 September 2015).

Please click on this link for a review on our previous weekly outlook.

• The weekly (long-term) Stochastic oscillator has continued to inch upwards from its oversold region and still has room for further upside potential before reaching its extreme overbought level. This observation suggests that the multi-month downside momentum since late May 2015 has abated (see weekly chart).
• The Index is still holding above the “Black Monday”, 24 August 2015 low of 20070 which is also the low of the weekly “Doji” candlestick (see weekly chart).
• The daily (intermediate-term) RSI oscillator is exhibiting mixed signals as it continues to hover above its pull-back support but remains stuck below its resistance/50% neutrality level (see daily chart).
• Since the  “Black Monday”, 24 August 2015 low of 20070, the Index has evolved into an impending bullish  “Double Bottom” chart configuration with its neckline resistance at 22400 (see daily & 4 hour charts).
• The next significant resistance stands at the 24000/24900 zone which is defined by the trendline resistance joining the highs since 26 May 2015 @8am, 50% Fibonacci retracement of the down move from 26 May 2015 high @8am to 24 August 2015 low @8pm and the exit potential of the bullish “Double Bottom” configuration (see 4 hour chart).
• The Index is now being supported by a trendline support linking the lows of 24 August 2015 @8pm and 07 September 2015 low @4pm now at 20860 (see 4 hour chart).
• The 20860 trendline support also confluences with a Fibonacci cluster (61.8% Fibonacci retracement from 24 August 2015 low @8pm to 16 September2015 high @8pm + close to 61.8% Fibonacci projection from 25 August 2015 high @4pm to 15 September 2015 high @8pm) (see 4 hour chart).
• The 4 hour (short-term) Stochastic oscillator still shows some downside potential before reaching its extreme oversold level. This observation suggests that the Index may see a push down to its range support zone at 21310/20860 (see 4 hour chart).
• The significant long-term support stands at 19400 which are defined by the mega long-term ascending trendline in place since December 1987 and a Fibonacci cluster (see monthly chart).

Key levels (1 to 3 weeks)

Intermediate support: 21310

Pivot (key support): 20860

Resistance: 22400 & 24000/24900

Next support: 20070 & 19400 (long-term)

Conclusion

The Index remains trapped in a sideways configuration between its significant range support at 21310/20860 and the neckline resistance of the impending “Double Bottom” at 22440. It needs to break above 22400 in order to trigger a potential rally towards the 24000/24900 resistance zone.

On the other hand, failure to hold above the 20860 weekly pivotal support is likely to see a slide to retest the “Black Monday”, 24 August 2015 low of 20070.

Source:  Charts are from eSignal & City Index Advantage Trader

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