hang seng daily outlook thurs 21 apr 2016 any potential pull back is likely to be held by the 214802

(Click to enlarge charts)

What happened earlier/yesterday

The Hong Kong 50 Index (proxy for the Hang Seng Index futures) has failed to penetrate below the 21000 level and stage a strong upside reversal in line with the major stock indices and WTI crude oil.

In today 21 April 2016 morning session, the Index has broken above the 21530 pivotal resistance and invalidated our preferred bearish setback scenario.  Please click here for a recap on our previous daily short-term outlook/strategy. 

Key elements

• Yesterday’s price action has indicated that the short-term upside momentum of price action remains intact and it does not pay to fight with it at this juncture. The 4 hour Stochastic oscillator, an indicator that measures price momentum is still oriented to the upside as it still has room to manoeuvre before reaching its extreme overbought level.
• Since the low of 08 April 2016, the index has continued to evolving with a short-term bullish ascending channel and now price action is showing potential for a test on the upper boundary (resistance) of the channel at 22200/300 which also confluences with a Fibonacci projection cluster and the graphical swing high area of 24 December 2015 high.
• The key short-term support now rests at 21240 which is defined by the lower boundary of the bullish ascending channel.

Key levels (1 to 3 days)

Intermediate support: 21480

Pivot (key support): 21240

Resistance: 22200/300

Next support: 20600

Conclusion

Short-term upside momentum of price action remains intact. The short-term hourly Stochastic oscillator has reached its extreme overbought level where it highlights the risk of a pull-back. The intermediate support at 21480 with a maximum limit set at the 21240 short-term daily pivotal support is likely to hold any short-term pull-back in price action before a potential up leg materialises to target the next resistance at 22200/300.

On the other hand, failure to hold above the 21480 short-term pivotal support may negate the bullish tone for a slide towards the next support at 20600.

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