hang seng daily outlook thurs 16 june 2016 further potential decline below 20290460 resistance 18161

(Click to enlarge charts)

What happened earlier/yesterday

The Hong Kong 50 Index (proxy for the Hang Seng Index future) has staged a gapped down in today’s opening session (16 June 2016) and broke below the 20100/20090 short-term pivotal support (current intraday session low is at 20001).

Yesterday’s preferred short-term rebound scenario has been invalidated as it printed only a high of 20572 which is below the expected target/resistance of 20740/820.

Please click on this link for a recap in our prior updated daily short-term technical outlook/strategy.

Key elements

• On the shorter-term, the Index has started to evolve within a bearish descending channel (depicted in pink) in place since 08 June 2016 high. Its lower boundary (support) is now at 19740 which also coincides with the minor swing low area of 23/24 May 2016 (see 1 hour chart).
• The upper boundary (resistance) of the descending channel stands at 20290 which confluences with today’s opening price action that has left a gap zone of 20290/460.
• The 4 hour Stochastic oscillator has just exited from the overbought zone and still has further room to manoeuvre to the downside before reaching an extreme oversold level. This observation suggests that short-term downside momentum of price action remains intact. However on the 1 hour Stochastic oscillator, it has already reached an extreme oversold level where a potential minor rebound cannot be rule out at this juncture.

Key levels (1 to 3 days)

Pivot (key resistance): 20290/460

Supports: 19740 & 19560

Next resistance: 20820

Conclusion

Bearish bias. Any potential minor rebound is likely to be capped below the 20290/460 short-term pivotal resistance for another potential downleg to target the 19740 support and even 19560 (the minor swing low areas of 13 May/19 May 2016).

However, a break above the 20290/460 short-term pivotal resistance is likely to invalidate the bearish scenario for a further push up towards the next resistance at 20820 (pull-back resistance of the former short-term ascending channel’s support from 19 May 2016 low).

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