Hang Seng Index Technical Outlook: Upside Could Be Capped


HANG SENG, HK Equities, HSI – Technical Outlook:

  • The Hang Seng Index’s upward momentum seems to be sturdy.
  • However, the upside could possibly be capped.
  • What is the short-term outlook and what are the important thing ranges to observe?

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Strong momentum in current days raises the potential of an prolonged pause within the Hang Seng Index’s multi-month slide. However, the index’s upside could possibly be capped.

The rebound has properly surpassed the preliminary value goal of 17050 identified within the earlier replace. The rise earlier this month above a minor horizontal trendline from the tip of October (at about 15800) triggered a minor reverse head & shoulders sample (the left shoulder on the October 25 low, the pinnacle on the October 31 low, and the correct shoulder on the Thursday low). The value goal of the sample works out to about 17050.

Hang Seng Index Hourly Chart

Chart Created Using TradingView

The index is now testing a stronger converged barrier on the March low of 18235, coinciding with the early-October low. Strong momentum on intraday charts raises the scope of some extra positive aspects within the close to time period, doubtlessly towards the 200-period transferring common on the 240-minute chart, barely under the May low of 19180. Overall, the world of 18235-19180 seems to be sturdy resistance and will cap the rebound.

The sharp positive aspects this month raises the prospect of a significant corrective rally, however in all probability not sufficient to counsel a reversal of the downtrend. In this regard, the medium-term downward stress is unlikely to ease whereas the index stays under the 200-day transferring common (now at about 20300).

Hang Seng Index Monthly Chart


Chart Created Using TradingView

The broader pattern stays down as mirrored by the detrimental Moving Average Convergence Divergence indicator (MACD) on the weekly, month-to-month, and quarterly charts. A detrimental studying of the MACD signifies a downtrend and vice versa. The downtrend within the Hang Seng Index has accelerated this 12 months after it fell under an uptrend line from 2016 (that got here at about 22600). The break triggered a serious head & shoulders sample (the left shoulder is at 2015 excessive, the pinnacle is at 2018 excessive, and the correct shoulder is at 2021 excessive), implying a possible transfer in the direction of the Great Financial Crisis low of 10676. The index fell to 14597 on the finish of final month earlier than rebounding.

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— Written by Manish Jaradi, Strategist for DailyFX.com

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