hang seng daily outlook thurs 26 may 2016 potential corrective rally extends above 20100 support 181

(Click to enlarge chart)

What happened earlier/yesterday

The Hong Kong 50 Index (proxy for the Hang Seng Index future) has broken above the 20105 short-term pivotal resistance and the preferred direct drop scenario has been invalidated.

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

Key elements

• After yesterday’s acceleration seen in the price action of the Index, it has now pull-backed to the former upper limit of a short-term ascending channel bullish breakout that occurred yesterday.
• The significant short-term support now rests at 20100 which are the former minor swing high areas of 12/17 May 2016 and just below the pull-back support of the aforementioned short-term ascending channel bullish breakout.
•  The hourly (short-term) Stochastic oscillator has dipped into its oversold region which suggests that downside momentum of the current pull-back in price action has started to dissipate.
• The significant resistance remains at 20600 which is the current medium-term pivotal resistance.

Key levels (1 to 3 days)

Pivot (key support): 20100

Resistance: 20600

Next support: 19740 & 19500

Conclusion

As long as the 20100 short-term pivotal support holds, the Index is likely to stage another round of potential push up to target the medium-term pivotal resistance at 20600.

However, a break below 20100 may invalidate the short-term bullish scenario and reinstate the bears for a further drop towards the 19740 and 19500 supports.

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