hang seng daily outlook tues 16 feb 2016 approaching minor risk zone of 19470 where a potential pull

(Click to enlarge chart)

What happened earlier

The Hong Kong 50 Index (proxy for the Hang Seng Index futures) has continued to surge higher in line with the mainland China stock market.  The expected medium-term countertrend rally remains intact as per highlighted in our latest weekly outlook/strategy published yesterday (click here for details).

Key elements

• Current price action is now pushing higher but it is now fast approaching an intermediate resistance zone of 19300/470 which is defined by the recent minor swing high area of 05 February 2016 and the 2.618 Fibonacci projection from 11 February 2016 low of 18056 to 12 February 2016 high of 18499 @1pm projected from 12 February 2016 low of 18315 @3pm.
• The hourly (short-term) Stochastic oscillator has reached its extreme overbought level which suggests limited upside potential in price action at this juncture.
• The near term support rests at 18950/810 zone which is defined by the pull-back support of this morning’s bullish breakout from the former descending trendline from 29 January 2016 high and the trendline support from 11 February 2016 low.

Key levels (1 to 3 days)

Pivot (key resistance):  19470

Support: 18950/810

Next resistance: 19720

Conclusion

The Index is now approaching a short-term risk zone (pivotal resistance) at 19470 where it is likely to see a minor drop towards the 18950/810 support before resuming the expected medium-term countertrend rally.

However, a clearance above the 19470 short-term pivotal resistance is likely to invalidate the minor pull-back to see an extension of the current rally to target the next resistance at 19720 (swing high of 29 January 2016 and the pull-back resistance of the former trendline support from 21 January 2016 low).

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