hang seng index weekly outlook for 04 may to 08 may 28090 remains the potential downside trigger 562

(Click to enlarge charts)

What happened last week

The Hong Kong 40 Index (proxy for the Hang Seng Index) has drifted lower and tested the 28090 potential downside trigger.

Please click on this link for more details on our previous weekly outlook.

Key elements

• The Index has remained below the median line (resistance) of its long-term ascending channel (in green) in place since 26 October 2008 at 28600 (see weekly chart).
• Interestingly, it has also formed a weekly “Doji” candlestick pattern last weekly right below the 28600 resistance (median line of the long-term ascending channel). This observation suggests “hesitation” by the bulls to push the Index higher. (see weekly chart).
• The 28600 resistance also confluences a Fibonacci projection cluster (see daily chart).
• The intermediate term RSI oscillator continues to flash a bearish divergence signal and still has room for further potential downside before reaching its pull-back support (in dotted green) (see daily chart).
• The pull-back support of the former intermediate term ascending channel breakout (from 26 June 2013 low, in dark blue) is at 26900 (see daily chart)
• The 26900  also coincides closely with the38.2% Fibonacci retracement (typical wave 4 target)  from 11 march 2015 low to current 27 April 2015 high (see daily chart).
• The 20-day Moving Average (in red) is also acting as a support at around 26900 (see daily chart).

Key levels (1 to 3 weeks)

Pivot (key resistance): 28600

Support: 28090 & 27300/26900

Next resistance: 30150/30500

Conclusion

Current technical elements are still “toppish” from an intermediate term (1 to 3 weeks) perspective.  A break below the 28090 downside trigger is likely to unleash a potential decline to target the 27300/26900 support zone before another round of upside movement occurs.

However, a clearance above the 28600 weekly pivotal resistance may invalidate the intermediate term bearish scenario for a potential rally towards 30150/30500 next.

Disclaimer

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