Tencent & AIA may torpedo Hang Seng Index
Kelvin Wong October 24, 2019 4:20 AM
Medium-term technical outlook on Hong Kong 50/Hang Seng Index
Key Levels (1 to 3 weeks)
Intermediate resistance: 26700
Pivot (key resistance): 27000
Supports: 26140, 25500 & 24870/500
Next resistance: 28200
Directional Bias (1 to 3 weeks)
Bearish bias below 27000 pivotal resistance for potential push down towards 26140 before targeting the next support at 25500 within a major range consolidation configuration in place since 26 Oct 2018 low seen in the Hong Kong 50 Index (proxy for Hang Seng Index futures).
However, a clearance with a daily close above 27000 invalidates the bearish scenario for a further corrective rebound towards the upper limit of the major range configuration; setting sight on 28200 in the first step (former swing low areas of 26 Jun/09 July 2019 & the 61.8% Fibonacci retracement of the previous decline from 03 May high to 15 Aug 2019 low).
- The recent rebound from 10 Oct 2019 low of 25475 has stalled at a medium-term descending trendline from 03 May 2019 high, acting as a resistance at 27000 that confluences with the 76.4% Fibonacci retracement of the recent slide from 13 Sep high to 10 Oct 2019 low and the former ascending support from 15 Aug 2019 low.
- The 4-hour Stochastic oscillator has traced out a bearish divergence signal at its overbought region which indicates that the upside momentum of the recent rebound from 10 Oct low to 18 Oct 2019 high has started to wane. Thus, the risk of a short to medium-term downside reversal increases at this juncture.
- Negative elements have been sighted in the heavy weightage component stocks of the Hang Seng Index; Tencent (Technology) and AIA (Financials) with a combined weightage of 19.48% that may put a downside pressure in the Hang Seng Index (see below charts for more details).
- Highlighted in our previous report (click here for a recap); 351.00 key pivotal support and 316.80 remains the significant downside trigger level (a range support in place since 21 Dec 2018).
- A break below 316.80 opens up scope for a potential multi-week decline towards the 30 Oct 2018 swing low area at 292.70.
click to enlarge chart
- Since 88.50 all-time high printed on 19 Jul 2019, AIA has started to trace out a “Head & Shoulders” bearish configuration where it tends to form at the end of uptrend that indicates a potential topping process.
- The neckline support of the “Head & Shoulders” rests at 72.10 where a daily close below it triggers a multi-week decline towards the next significant medium-term support at 64.60 (major ascending support from Mar 2016 low & 1.00 Fibonacci expansion of the decline from 19 Jul to 14 Aug 2019 low projected from 12 Sep 2019 high).
Charts are from eSignal & In House platform.
Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.