Hang Seng Index Weekly Outlook for 17 Aug to 21 Aug Hovering above the 23450 long term key support

(Click to enlarge charts)

What happened earlier

The Hong Kong 40 Index (proxy for the Hang Seng Index) has continued to drift sideways below the 24900 potential medium-term upside trigger level.

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

*Please note that the weekly candlestick for 06 July to 10 July 2015 is erroneous as it did not have a weekly close below the 23450 support. This error will be rectified as soon as possible. 

Key elements

• Current price action is now testing the key long term support at 23450 which is the lower boundary of the long-term ascending channel in place since 26 October 2008 low (the start of the on-going major bullish trend) (see weekly chart).
• The 23450 long term support also coincides with the 61.8%/76.4% Fibonacci retracement of the recent up move from 08 July 2015 low@12pm to 21 July 2015 high@12pm (see 4 hour chart).
• The long term Stochastic oscillator has dipped back into its oversold region (see weekly chart).
• The significant intermediate resistance remains at 24000 range top which confluences with the 50% Fibonacci retracement of the up move from 08 Jul 2015 low @12pm to 21 Jul 2015 high @12pm and the descending trendline joining the highs since 26 May 2015 (see daily chart).
• The next resistance to watch will be at the 26400/27000 zone which confluences with the 61.8%/76.4% Fibonacci retracement from 27 Apr 2015 high @12pm to 08 Jul 2015 low @12pm (see 4 hour chart).
• The short-term Stochastic oscillator is now coming close to its extreme oversold level which suggests that the current downside momentum is at its potential cyclical low where a rebound in price action is imminent (see 4 hour chart).

Key levels (1 to 3 weeks)

Pivot (key support): 23450

Resistance: 24900, 26400 & 27000

Next support: 22710 & 21170

Conclusion

The Index is now back at its key inflection level of 23450 (the long-term key support as aforementioned) but lack of upside momentum to push up and form a new swing high.

Thus, the 24900 range top remains the key intermediate resistance that the Index needs to breakout in order to gain inertia for a potential upside movement to target 26400.

On the other hand, failure to hold above the 23450 weekly pivotal support is likely to damage the long-term bullish trend and see the start of severe correction towards 22710 before 21170 in the first instance.

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