hang seng daily outlook tues 31 may 2016 potential bearish reaction below 2084021100 resistance 1813

(Click to enlarge charts)

 What happened earlier/yesterday

The Hong Kong 50 Index (proxy for the Hang Seng Index future) has continued to push higher in today’s morning session (31 May 2016) and its up by 0.79% from yesterday’s close.

 Key elements

• The Index is now coming close to a descending trendline in place since 26 October 2016 high now resistance at 20840/21100 (see daily chart).
• The 21100 resistance also confluences with a Fibonacci cluster and now the upper limit of a short-term ascending channel in place since 24 May 2016 low@2pm (see daily chart).
• The 21100 resistance is the current medium-term pivotal resistance set for this week. (Please click here to recap our latest weekly technical outlook/strategy published yesterday)
• The hourly (short-term) Stochastic oscillator has flashed a bearish divergence signal at the overbought region which suggests the short-term upside momentum of the recent up move has started to wane. These observations reinforce our expectation for a potential bearish reaction at/close to the 21100 pivotal resistance (see hourly
• Near-term supports rest at 20500 and 20270.

 Key levels (1 to 3 days)

Intermediate resistance: 20840

Pivot (key resistance): 21100

Supports: 20500 & 20270

Next resistance: 21650

 Conclusion

As long as the 21100 pivotal resistance is not surpassed, the Index is now expected to shape a least a potential bearish reaction in the short-term to target the supports at 20500 and 20270.

On the flipside, a break above the 21100 pivotal resistance is likely to open up scope for a further rally towards the next resistance at 21650 (21/28 April 2016 swing high area).

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