hang seng daily outlook wed 08 june 2016 further potential push up above 2110021000 1814832016

(Click to enlarge charts)

What happened earlier/yesterday

The Hong Kong 50 Index (proxy for the Hang Seng Index future) has surpassed the 21100 medium-term pivotal resistance set for this week (click here to recap), thus the preferred direct drop scenario has been invalidated.

*The cash market will be closed for a public holiday tomorrow, Thurs 09 May 2016.

Key elements

• The current price action has surpassed the former descending trendline resistance in place since 26 October 2015 high now turns pull-back support at 21000.
• The daily (medium-term) RSI oscillator has almost reached its overbought region but it has not shape a bearish divergence signal. These observations suggest that upside momentum of price action remains intact.
• The key short-term support to watch now will be at 21100/21000 which confluences with a couple of elements (former descending trendline from 26 October 2015 high now turns pull-back support + short-term ascending trendline support from 24 May 2016 low@3pm + 23.6% Fibonacci retracement of the recent rally from 19 May 2016 low to yesterday’s high of 21401).
• The hourly (short-term) Stochastic oscillator is now coming close to an extreme oversold level which suggests that downside momentum of the current decline is waning where a potential upturn in price action is eminent.
• The significant short-term resistance now stands at 21650 which is defined by the 18/27 April swing high area.

Key levels (1 to 3 days)

Pivot (key support): 21100/21000

Resistance: 21650

Next support: 20500

Conclusion

As long as the 21100/21000 daily short-term pivotal support holds, the Index is likely to stage a further push up to target the 21650 resistance.

On the other hand, a break below the 21100/21000 short-term pivotal support is likely to invalidate the bullish push up scenario for a deeper slide to test the next support at 20500 (50% Fibonacci retracement of the recent rally from 19 May 2016 low to yesterday’s high of 21401 and the ascending trendline support in place since the start of the rally from 19 May 2016 low).

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