hang seng daily outlook tues 26 jan 2016 watch 19500 for a potential bullish breakout 1794782016

(Click to enlarge chart)

What happened yesterday

The Hong Kong 40 Index (proxy for the Hang Seng Index) has started to retrace and in this morning opening, it has gaped down towards the medium-term intermediate support zone of 18900/540 as per highlighted in our latest weekly outlook/strategy (click here for details)

Key elements

• The Index has pull-backed right at a descending trendline that has linked the lower highs since 08 January 2016 now resistance at 19500.
• The significant resistance stands at the 20226/380 zone which is defined by the former range support of that linked the swing lows area of 24 August  and 29 September 2015 and the 50% Fibonacci retracement of the recent steep decline from 24 December 2015 high to 21 January 2016 low.
• The hourly Stochastic oscillator has just exited from its oversold region which suggests a potential upturn in price action.

Key levels (1 to 3 days)

Pivot (key support): 18540

Resistances: 19500 & 20226/380

Next support: 18200

Conclusion

Technical elements are showing signs of positive development. Pivotal support at 18540 and a break above the 19500 minor swing high is likely to add impetus for a further upside movement to target the next resistance at 20226/380.

On the other hand, a break below the 18540 pivotal support may see a further slide to test the next support at 18200.

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