hang seng daily outlook fri 20 may 2016 tolerate the excess to 20105 for a potential push down 18121

(Click to enlarge charts)

What happened earlier/yesterday

The Hong Kong 50 Index (proxy for the Hang Seng Index future) has almost hit the first expected downside target of 19500 (printed a low of 19557) before the close of yesterday’s European session.

In today’s morning session, the Index has gapped up in line with the late short squeeze seen in the major benchmark U.S. stock indices before the close of the U.S. session. Please click on this link for a recap on our previous daily short-term outlook/strategy.

Key elements

• The Index has spiked up and challenged the 19910 short-term pivotal resistance but we are tolerating  the excess to 20105 which is defined by the minor swing high areas of 12/17 May 2016 and the 23.6% Fibonacci retracement of the recent decline from 21 April 2016 high to last Friday, 13 May 2016 low of 19579.
• The hourly (short-term) Stochastic oscillator is now coming close to an extreme overbought level which suggests limited upside potential in price action as upside momentum is “overstretched” at this juncture.
• The next significant short-term support after 19500 remains at 19050 which is defined by the minor swing low area of 29 February 2016 and the 0.764 Fibonacci projection of the down move from 21 April 2016 high of 21648 to 06 May 2016 low of 19993 projected from 11 May 2016 high @9am.

Key levels (1 to 3 days)

Pivot (key resistance): 19910/20105 (excess)

Supports: 19500 & 19050

Next resistance: 20500/600

Conclusion

The daily short-term pivotal resistance at 19910 is being challenged but we are tolerating an excess to 20105 to maintain the bearish view for another round of potential push down to target the 19500 support.

However, failure to hold below the 20105 (excess) short-term pivotal resistance is likely to invalidate the preferred bearish scenario for a further squeeze up towards the next resistance at 20500/600 (the minor swing high area of 05 May 2016 and the 50% Fibonacci retracement of the recent decline from 21 April 2016 high to last Friday, 13 May 2016 low of 19579).

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