hang seng daily outlook fri 10 june 2016 at 2110021000 support for a potential upside reversal 18152

(Click to enlarge charts)

What happened earlier/yesterday

The Hong Kong 50 Index (proxy for the Hang Seng Index future) has reopened with a gapped down by -0.4% after a closure for a public holiday yesterday.

Interestingly, current price action is now right at the intermediate support of 21100 as per highlighted in our previous daily short-term outlook/strategy published on Wednesday, 08 June 2016 (click here for a recap).

Key elements

• The intermediate support at 21100 also coincides with the median line of a short-term ascending channel in place since 19 May 2016 low (see 1 hour chart).
• The key short-term support remains at 21000 which is defined by a confluence of elements; the 23.6% Fibonacci retracement of recent rally from 19 May 2016 low to 07 June 2016 high at 21401, the former minor swing high areas of 31 May/03 June 2016 and the pull-back support of the former descending trendline from 26 October 2015 high (see daily & 1 hour charts).
• The hourly (short-term) Stochastic oscillator is now back at an extreme oversold level which price action is likely to stage a rebound.
• The significant short-term resistance remains at 21650 which is defined by the 18/27 April swing high area and now the upper boundary of the short-term ascending channel (see daily & 1 hour charts).

Key levels (1 to 3 days)

Intermediate support: 21100

Pivot (key support): 21000

Resistance: 21650

Next support: 20500

Conclusion

As long as the 21000 daily short-term pivotal support holds, the Index is likely to stage a potential upside reversal to target the 21650 resistance.

However, failure to hold above the 21000 short-term pivotal support is likely to invalidate the preferred bullish scenario for a deeper slide to test the next support at 20500 (50% Fibonacci retracement of the recent rally from 19 May 2016 low to 07 June 2016 high of 21401 and the lower boundary of the ascending channel in place since the start of the rally from 19 May 2016 low).

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