hang seng daily outlook fri 13 may 2016 medium term downside target support at 19680500 almost met t

(Click to enlarge charts)

What happened earlier/yesterday

The Hong Kong 50 Index (proxy for the Hang Seng Index futures) has indeed shaped the expected decline below the predefined short-term resistance at 20000/20160. In today’s morning session, the Index has hit the upper limit of our expected medium-term downside target (support) at 19680/500 set at the start of this week (recap over here).

Please click on this link for a recap on our previous daily short-term outlook/strategy.

Key elements

• The Index has printed a current intraday low of 19688 which is close to the medium-term downside target (support) of 19680/500 as per defined by the former swing high areas of 29 January/22 & 26 February 2016 and the 61.8% Fibonacci retracement of rally from 11 February 2016 low to 21 April 2016.
• The hourly Stochastic oscillator has reached an extreme oversold level and the 4 hour Stochastic oscillator has flashed a bullish divergence signal at its oversold region. These observations suggests that the current down move is being overstretched and downside momentum is waning which highlights the risk of a minor rebound/consolidation in price action at this juncture.
• The near-term resistance now stands at 20000 which is defined by the upper boundary of the short-term descending channel in place since 28 April 2016 high @11am.
• The next support after 19680/500 rests at 19050 which is the lower boundary of the aforementioned short-term descending channel.

Key levels (1 to 3 days)

Resistances: 20000 & 20590

Supports: 19680/500 & 19050

Conclusion

The medium-term downside target (support) at 19680/500 has almost been met and short-term technical elements are not supportive of a further potential decline. Turn neutral for now between 20000 and 19680/500.

Only a break above 20000 may trigger a minor rebound/consolidation towards the next resistance at 20590.

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