hang seng daily outlook tues 17 may 2016 potential minor rebound above 19725500 support 1811632016

(Click to enlarge charts)

What happened earlier/yesterday

The Hong Kong 50 Index (proxy for the Hang Seng Index futures) has continued to trade in a sideways fashion despite yesterday recovery seen in the major U.S. benchmark stock indices.

Key elements

• Do take note that the Index has reached a medium-term support/risk zone at 19680/500 where it faces the risk of a minor rebound at this juncture. Click here for more details as per highlighted in our latest weekly technical outlook/strategy published yesterday.
• The Index has staged a bullish breakout above a former short-term term descending trendline resistance (in dotted green) from 28 April 2016 high now turns pull-back support at 19725.  In addition, current price action has dipped close to the pull-back support.
• The hourly (short-term) Stochastic oscillator is now coming close to an extreme oversold level which suggests a potential upturn in price action as downside momentum gets “overstretched”. These observations support the minor rebound view in price action of the Index.
• The significant short-term resistance stands at 20500/600 which is defined by the minor swing high areas of 05 May 2016 /11 April 2016 and the 50% Fibonacci retracement of the recent decline from 21 April 2016 high to last Friday, 13 May 2016 low of 19579.

Key levels (1 to 3 days)

Intermediate support: 19725

Pivot (key support): 19500

Resistance: 20500/600

Next support: 19050

Conclusion

As long as the daily short-term pivotal support at 19500 holds, the Index may shape a minor rebound towards the 20500/600 resistance within a medium-term bearish trend.

However, a break below the 19500 short-term pivotal support is likely to invalidate the minor rebound/snap-back scenario to kick start a direct drop towards the next support at 19050 in the first step.

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