hang seng index daily outlook for wed 09 sep pull back before potential new rise above 2130021000 12

(Click to enlarge chart)

What happened yesterday

The Hong Kong 40 Index (proxy for the Hang Seng Index) has managed to break above the 21000 upside trigger level as per highlighted in our latest weekly outlook (click here for more details).

Key elements

• Current price action has broken above the 21000 upside trigger level and former short-term trendline resistance (in dotted pink) joining the highs since 11 August 2015 @10am now turns pull-back support at 21300.
• The intermediate significant resistance to watch will be at 22400 which is the neckline of the impending bullish “Double Bottom” chart configuration.
• The hourly (short-term) Stochastic oscillator has reached its extreme overbought level which indicates that the Index may stage a pull-back at this juncture.

Key levels (1 to 3 days)

Intermediate support: 21300

Pivot (key support): 21000

Resistance: 22400

Next support: 20070

Conclusion

Current technical elements have reinforced the recovery scenario. However, we do expect a potential pull-back first towards the 21300 level which a maximum limit set at the 20070 daily pivotal support before a new rise towards the 22400 neckline resistance of the “Double Bottom”.

However, failure to hold above the 21000 pivotal support is likely to damage the bullish tone to see a slide to retest the “Black Monday”, 24 August 2015 low at 20070.

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