hang seng daily outlook wed 16 mar 2016 maintain bearish bias below 20520 resistance 1802022016

(Click to enlarge charts)

What happened yesterday/earlier

In our previous short-term daily outlook/strategy published on Tues, 15 March 2016 (click here for a recap), the Hong Kong 50 Index (proxy for the Hang Seng Index futures) has started its expected decline from the 20380/520 “risk zone” in a slow descend fashion (printed a low of 20209 in the U.S. session).

Key elements

• In today’s morning session, the Index has gapped up due to a late recovery seen in the major U.S. stock indices as they erased all their earlier losses. Despite this upturn seen in price action, the Index is still below the 20380/520 “risk zone”.
• The daily (medium-term) RSI oscillator is still capped by the significant resistance where in the past two occasions price action of the Index has failed to make a further advance when the RSI retreated from this resistance (highlighted by the pink ovals). This observation suggests a lack of upside momentum where the risk of a decline increases as we are at the end of the current countertrend rally cycle that started from 11 February 2016 low of 18056.
• The significant risk zone of 20380/520 is defined by the former swing lows area of 24 August 2015 and 29 September 2015, upper boundary of the bearish descending channel in place since 26 May 2015 high and a Fibonacci cluster (click here for more details as per highlighted in our latest weekly outlook/strategy).
• The significant short-term support now rests at 19960/800 which is defined by the lower boundary of the ascending channel from 11 February 2016 low and the minor swing lows area of 03 March and 11 March 2016.

Key levels (1 to 3 days)

Pivot (key resistance): 20520

Support: 19960/800

Next resistance: 21000 (weekly pivot)

Conclusion

We maintain our bearish bias to see the start of a potential steep decline as we are at the end of the current countertrend rally cycle that started from 11 February 2016 low.

As long as the 20520 pivotal resistance is not surpassed, the Index is likely to shape a further decline to target the 19960/800 support in the first step.

However, a clearance above the 20520 short-term pivotal resistance may put the bears on hold to see a “residual” squeeze up towards the excess at 21000 (weekly pivotal resistance).

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