hang seng daily outlook wed 17 feb 2016 potential rebound looms above 1895018790 support 1797562016

(Click to enlarge chart)

What happened yesterday

The Hong Kong 50 Index (proxy for the Hang Seng Index futures) has staged the expected retracement below the 19470 pre-defined resistance (printed a high of 19275) and almost met the upper limit of our downside target of 18950 (printed a low of 18995).

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

Key elements

• Current price action has traded sideways in the morning session and it has given up its earlier gains. It is now trading close to the 18950 support which is defined by the pull-back support (in dotted green) of the former trendline resistance from 29 January 2016 high and the lower boundary of a short-term bullish ascending channel in place since 11 February 2016 low.
• The next significant short-term support rests at 18790 which is the former swing lows of 26 January 2016 and 03 February 2016 and 38.2% Fibonacci retracement of the recent rally from 11 February 2016 low to yesterday’s high of 19275.
• The hourly (short-term) Stochastic oscillator still has room for further upside potential before reaching its extreme overbought level.
• The near term resistances stands at 19410 (minor swing high of 05 February 2016) and 19720 (upper boundary of the short-term ascending channel, swing high of 29 January 2016 and 0.618 Fibonacci projection of the up move from 11 February 2016 low to 16 February 2016 high of 19275 @1pm projected from 16 February 2016 low of 18995 @11pm).

Key levels (1 to 3 days)

Intermediate support: 18950

Pivot (key support): 18790

Resistances: 19410 & 19720

Next support: 18450

Conclusion

The Index is now approaching the 18950/18790 support zone where it is likely to stage a potential recovery to target the 19410 resistance in the first step.

On the other hand, failure to hold above the 18790 short-term pivotal support is likely to put the bulls on hold to see a deeper pull-back towards the next support at 18540/450 (gap and the former swing low of 21 January 2016).  

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