hang seng daily outlook wed 20 jan 2016 risk of short term rebound above 18900700 support 1794002016

(Click to enlarge charts) What happened yesterday The Hong Kong 40 Index (proxy for the Hang Seng Index) has performed better than our expectation […]

(Click to enlarge charts)

What happened yesterday

The Hong Kong 40 Index (proxy for the Hang Seng Index) has performed better than our expectation without shaping a drop to the 18900 support. It rallied in the European session and almost met the upside target at 19850 (printed a high of 19727 before it reversed down sharply in the U.S. session).

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

Key elements

In today’s morning session, the Index has plummeted straight to test the 18900 support which is defined by a Fibonacci projection cluster with excess at 18700 and the lower boundary of the short-term “Expanding Wedge” in place since s08 January 201 high.
The hourly (short-term) RSI continues to post an impending bullish divergence signal which indicates that downside momentum is waning thus the Index may shaped a rebound at this juncture since it is trading close to the lower boundary (support) of the “Expanding Wedge”.
The short-term gap resistance stands at 19340/447

Key levels (1 to 3 days)

Pivot (key support): 18900/700 (excess)

Resistance: 19340/447

Next support: 18200

Conclusion

As long as the 18900/700 short-term pivotal support holds, the Index may see a risk of a short-term rebound towards the gap resistance of 19340/447.

However, failure to hold above the 18900/700 pivotal support is likely to open up scope for a further decline towards the medium-term downside target of 18200 (click here for our latest weekly outlook/strategy).

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