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

<p>(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 […]</p>

Hong Kong (weekly)_17 Aug 2015

Hong Kong (daily)_17 Aug 2015

Hong Kong (4 hour)_17 Aug 2015(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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