chart of the day risk of a minor pull back looms for hang seng 1856072017

Short-term technical outlook on Hang Seng (Thurs, 13 Jul 2017)

(Click to enlarge charts)

What happened earlier/yesterday

The Hong Kong 50 Index (proxy for Hang Seng Index futures) had staged a magnificent rally of 4.2% since the start of the week on 10 July 2017 and hit our expected first medium-term upside target/resistance of 26335/400 (click here for a recap on our weekly technical outlook published earlier).

Current short-term technical elements are now advocating for a potential pull-back/consolidation.

Key elements

• The current price action of the Index is now at the upper boundary of a short-term ascending channel from the 10 July 2017 minor swing low area at the 26420 level (see hourly chart).
• The 26420 short-term ascending channel resistance also confluences with a Fibonacci projection cluster (2.618 from 05 July 2017 low & 0.764 projection from 07 July 2017 low) from a recent set of price movements (see hourly chart).
• Based on the Elliot Wave Principal/fractal analysis, the Index is likely to have completed an extended minor degree impulsive wave 3 at the 26335/26420 zone from the 07 July 2017 minor swing low of 25297. Thus, it faces the risk of undergoing a bearish corrective pull-back (minor degree wave 4) before it resumes the bullish impulsive upleg wave 5 to complete the bullish minor degree wave structure in place since 05 July 2017 low of 25197.
• The hourly Stochastic oscillator has shaped a bearish divergence signal and exited its overbought region which suggests that the recent upside momentum of price has abated. Thus, observations from short-term momentum indicator support the aforementioned corrective wave 4 pull-back/consolidation scenario.
• The next significant short-term support rests at 26000 which is defined by the former minor range top of 20 June/29 June 2017, the lower boundary of the aforementioned short-term ascending channel and the 38.2% Fibonacci retracement of the steep rally from 07 July 2017 to today’s current intraday high of 26400 (see 1 hour chart).

Key Levels (1 to 3 weeks)

Pivot (key resistance): 26420

Supports: 26140 & 26000

Next resistance: 26960

Conclusion

Therefore, the Index now faces the risk of a minor pull-back/consolidation. As long as the 26420 short-term pivotal resistance is not surpassed, it may stage a decline to retest 26140 before 26000 within an on-going medium-term up.

However, a clearance above 26420 should see the continuation of the bullish impulsive upleg to target 26960 next (medium-term upside target/resistance & the upper boundary of the short-term ascending channel).

Disclaimer

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this email, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs. All queries regarding the contents of this material are to be directed to City Index, a trading name of GAIN Capital Singapore Pte Ltd.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit cityindex.com.sg for the complete Risk Disclosure Statement.