Featured Trade: Hang Seng broke below 28000 major support, further potential weakness ahead

Hang Seng may see the start of another fresh downleg

Short-term technical outlook on Hong Kong 50 (Mon, 06 Aug)



Key technical elements

  • After hitting a fresh all-time high of 33530 on 29 Jan 2018, the Hong Kong 50 Index (proxy for Hang Seng Index futures) has reintegrated below the previous Oct 2007 peak of 31958 and tumbled by 17% to break below its major support of 28000 (the swing low areas of 19 Oct/07 Dec 2017 & the primary ascending trendline in place since Feb 2016 low). It had a daily close and weekly close below 28000.
  • It printed a low of 27485 on last Thurs, 02 Aug before it staged a push up to print a high of 28075 in today, 06 Aug Asian opening session. The current intraday high of 28075 coincides with the former major support of 28000 and the 38.2% Fibonacci retracement of the recent down move from 01 Aug 2018 minor high of 28847 to 02 Aug 2018 low of 27485.
  • The hourly Stochastic oscillator has started to flash a bearish divergence signal at its overbought region which suggests that the on-going up move is likely to be a corrective rebound (lack of upside momentum).
  • The key short-term pivotal resistance is at 28200 (the pull-back resistance of former descending channel breakdown & close to the 50% Fibonacci retracement of the recent down move from 01 Aug 2018 minor high of 28847 to 02 Aug 2018 low of 27485  

Key Levels (1 to 3 days)

Intermediate resistance: 28000

Pivot (key resistance): 28200

Supports: 27760 & 27520

Next resistance: 28450/540

Conclusion

Therefore as long as the 28200 key short-term pivotal resistance is not surpassed, the Index is likely to stage another downleg to retest 27760 follow by last Thurs, 02 Aug swing low area of 27520 in the first step.

However, a clearance above 28200 negates the bearish tone for a squeeze up to target the next intermediate resistance at 28450/540.

Charts are from City Index Advantage TraderPro



Join our live webinars for the latest analysis and trading ideas. Register now

GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.