Featured Trade: Hang Seng Index bearish reaction below key resistance

The 3-month rally from its Jan 2019 swing low has started to shown signs of bullish exhuastion.

Short-term technical outlook on Hang Seng Index/Hong Kong 50 (Wed 20 Mar)



click to enlarge charts

Key technical elements

  • The recent push up of 5.7% seen on the Hong Kong 50 Index (proxy for Hang Seng Index futures) from its 08 Mar 2019 minor swing low of 28011 has stalled at its 29510 key medium-term resistance as per highlighted in our latest weekly technical outlook report published earlier on Mon (click here for a recap).  
  • The 29510 key medium-term resistance also now coincides closely with a Fibonacci expansion cluster derived from the lower time frame hourly price action from its 08 Mar 2019 low of 28011 (see daily chart).
  • The Index has broken below a minor ascending trendline support in place since 08 mar 2019 low now turns pull-back resistance at 29400. Prior to the breakdown, the daily RSI oscillator has flashed a bearish divergence signal since 06 Mar 2019 at its overbought region.
  • The shorter-term hourly RSI oscillator has indicated short-term downside momentum remains intact as it remains below the 50 level and still has room to manoeuvre to the downside before it reaches the oversold region.
  • The next significant near-term supports rests at 29180 (former minor swing high areas of 04/15 Mar 2019) and 28730 (the minor range support of 13/14 Mar 2019 & close to 50% Fibonacci retracement of the recent push up from 08 Mar 2019 low to 19 Mar 2019 U.S. session high).

Key Levels (1 to 3 days)

Intermediate resistance: 29400

Pivot (key resistance): 29510

Supports: 29180 & 28730

Next resistance: 30000

Conclusion

The 3-month rally from its 03 Jan 2019 low of 24886 has started to lose upside momentum right below the 29510 key medium-term resistance where the odds of a multi-week decline increases at this juncture.

If the 29510 key pivotal resistance is not surpassed, the Index is likely to stage a potential push down to target the next near-term supports at 29180 and 28730 in the coming days.

On the other hand, a clearance with a daily close above 29510 invalidates the bears for a continuation of the rally to target the intermediate resistance at 30000 (psychological & 1.382 Fibonacci expansion of the recent push up from 08 Mar 2019 low to 12 Mar 2019 minor high projected from 14 Mar 2019 minor low).

Charts are from City Index Advantage TraderPro



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