hang seng daily outlook wed 13 jan 2016 bullish breakout watch next resistance at 20680 1793032016

(Click to enlarge charts)

What happened yesterday

The Hong Kong 40 Index (proxy for the Hang Seng Index) has shaped a push down to test the key 19800/700 long-term support and managed to hold at this level as expected.

Please click on this link for a recap on our previous short-term daily outlook/strategy.

Key elements

• Earlier this morning, 13 January 2015, the Index has staged a bullish breakout from its former trendline resistance (in dotted green) that has linked the lower highs since 30 December 2015 now turns pull-back support at around 19900.
• The hourly (short-term) RSI oscillator has pierced above the 50% neutrality level and still has room for further upside before reaching its extreme overbought level.
• The next resistance stands at 20680 which is the former range bottom area of “Black Monday”, 24 August 2015 to 29 September 2015 which also confluences closely with the 38.2% Fibonacci retracement of the recent steep down move from 24 December 2015 high to yesterday’s low (see daily chart).

Key levels (1 to 3 days)

Pivot (key support): 19900

Resistance: 20680

Next support: 19800/700 & 19200

Conclusion

We maintain the bullish bias and tightened the daily short-term pivotal support to 19900 for a further potential push up to target the 20680 resistance (medium-term upper neutrality zone as per highlighted in our latest weekly outlook/strategy).

On the other hand, a break below 19900 may see another retest on the 19800/700 long –term key support. Only a clear violation below 19800/700 is likely to kick start a deeper correction to target the next support at 19200 in the first instance.

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