hang seng index daily outlook for thurs 13 aug hovering at the 23450 long term key support potential

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Key elements

• The Hong Kong 40 Index (proxy for the Hang Seng Index) has continued to tumble before stalling at the 23450 key long-term support which is the lower boundary of the long-term ascending channel in place since the major market bottom 26 October 2008 (see weekly chart).
• The hourly Stochastic oscillator has flashed a bullish divergence signal at the oversold region (see 1 hour chart).
• Current price action has implied a potential “bear trap” and a break above the 24000 intermediate resistance is likely to reinforce this scenario (see 1 hour chart).
• The next significant short-term resistance remains at 24900 which is the 2-week+ range top in place since 28 July 2015 (see 1 hour chart).

Key levels

Pivot (key support): 23450

Resistance: 24000 & 24900

Next support: 22700

Conclusion

The recent steep decline has managed to stall at the key long-term support of 23450. Interestingly, China central bank, PBoC is going to hold a special press conference today at 10.15am (SGT) to discuss the recent devaluation its currency, CNY.

Technically speaking, the Index appears to have formed a potential “bear trap” and a break above the 24000 is likely to reinforce this scenario for a push up to retest the 24900 range top.

However, failure to hold above the 23450 key support is likely to damage the long-term bullish trend and see a further plunge towards the 08 July 2015 swing low at 22700.

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