hang seng index weekly outlook for 25 may to 29 may pull back before potential new rise holding abov

(Click to enlarge charts)

What happened earlier last week

The Hong Kong 40 Index (proxy for the Hang Seng Index) has push higher and broke above the 28060 upside trigger level as expected.

Please click on this link to review our previous weekly outlook.

Key elements

• The long-term MACD trend indicator continues to trend upwards steadily above its centreline and it still has room before reaching its “extreme” level seen in October 2007. This observation suggests that the on-going multi-month bullish trend remains intact (see weekly chart).
• The Index has broken above the former short-term trendline resistance joining the highs since 27 April 2015 now turns pull-back support (in dotted green) at 27700 (see 4 hour chart).
• The 27700 support also corresponds with the trendline support (in dark blue) joining the lows since 07 May 2015 (see 4 hour chart).
• The intermediate RSI oscillator remains bullish above its pull-back support and 50% neutrality level. It also has room for further upside before reaching its overbought region (see daily chart).
• The 30150/30500 resistance zone also confluences with multiple Fibonacci projection clusters (see daily & 4 hour charts).
•  The short-term Stochastic oscillator has reached its “extreme” overbought level which suggests that a pull-back in price action is imminent for the Index (see 4 hour chart).

Key levels (1 to 3 weeks)

Intermediate support: 27970

Pivot (key support): 27700

Resistance: 28600 & 30150/30500

Next support: 26900 & 25150/25000

Conclusion

Technical elements remain positive. However on the shorter-term, the Index is likely to see a pull-back first towards the intermediate support at 27970 with a maximum limit set at the 27700 weekly pivotal support before the potential final push up towards the key resistance zone of 30150/30500.

On the other hand, failure to hold above 27700 may negate the bullish tone to see a retest on the 17 April 2015 swing low at 26900. Only a clear break below 26900 is likely to damage the medium term bullish trend in place since 16 December 2014 low for a deeper decline towards the long-term significant support at 25150/25000 (former resistance that capped the Index since October 2010).

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