In a previous post, i'd highlighted the Head & Shoulders pattern in the HSI, and suggested a target in the 19200 range. Subsequently, another post identified a wave 4 consolidation, suggesting a reversal might be at hand. Since then, the index hit a low of 19400, turned around rapidly, and broke through the downtrendline since Jan 2010.
HSI is currently in overbought territory and testing the neckline of the H&S at 20750 - serious resistance. I am expecting a consolidation here if not an outright reversal back down.
Main levels to watch
Main levels to watch
Resistance: 20750 and then 21000.
Support: 19400. A break below might take us down to 18600, 17200 & 15800.
Support: 19400. A break below might take us down to 18600, 17200 & 15800.
Correlations
The pattern since Jan 2010 has been very similar to the SPX. In the medium term, there is a lower probability scenario that the decline was a 3-waver, and a test of the highs is ahead. On the other hand, Shanghai Composite which has a huge influence on Hang Seng, is also at a channel resistance, supporting the view expressed.
In conclusion, i expect 20750 to be stiff resistance in the short-term, and expect some downside for this week.
Posts
2 comments:
Hi TL. If it breaks back into that H/S pattern it will go far. Broken patterns are the best to play as they usually run farther than we think.
JayinAsia
Hi JayinAsia
Agree. Although, i dont expect it to happen in the near-term. Let's watch how it works out!
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