(Click to enlarge charts)
What happened yesterday/earlier
In our earlier short-term daily outlook/strategy posted last Friday, 04 Mar 2016 (please click here for a recap), we have highlighted that the rally seen in the Hong Kong 50 Index (proxy for the Hang Seng Index futures) is coming close to a short-term risk zone of 20230/380 where the Index is likely to shape a pull-back/consolidation.
The Index has hit the upper limit risk zone at 20230 in the U.S. session on 04 Mar 2016 (printed a high of 20322) on the release of the latest U.S. nonfarm payrolls data for February 2016 and staged the expected pull-back thereafter seen throughout yesterday, 07 March 2016.
In this morning session, 08 March 2016, the Index has continued to decline towards the short-term support zone of 19720/600
- The Index continues to evolve within a bullish ascending channel in place since the start of this countertrend rally from 11 February 2016 low of 18056. The lower boundary (support) of the ascending channel also confluences with the 19720/600 support zone (gap and the former minor swing high area of 29 January 2016.
- The 1 hour (short-term) Stochastic oscillator is still inching downwards and still has room for further potential downside before reaching its extreme oversold level. This observation suggests that downside momentum remains intact.
Key levels (1 to 3 days)
Pivot (key resistance): 20080
Next resistance: 20380
Short-term technical elements remain bearish. We have tightened the short-term daily pivotal resistance to 20080 for a potential “residual” decline to target the 19720/600 support.
However, a break above the 20080 short-term pivotal resistance is likely to invalidate the bearish tone for a squeeze up towards the next resistance at 20380 (upper boundary of the descending channel in place since 26 May 2015 high).
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