hang seng index daily outlook for wed 12 aug potential recovery above 24000 key support 1012512015

(Click to enlarge chart)

Key elements

• The Hong Kong 40 Index (proxy for the Hang Seng Index)   has tumbled by 3%+ from its short-term range top (resistance) at 24900. Bear in mind that 24900 is a significant level as it is our medium term potential upside trigger level (click here to see more details as per highlighted in our latest weekly outlook).
• Current price action is now back at the 24000 range support and formed a hourly bullish “Hammer” candlestick pattern.
• The hourly Stochastic oscillator has exited from the oversold region and still has room for further potential upside before reaching its extreme overbought level.

Key levels

Pivot (key support): 24000

Resistance: 24900

Next support: 23450

Conclusion

Yesterday’s  drastic sell-off (risk-off) seen in global stock markets was driven by the sudden devaluation of the Chinese CNY as market participants view this move as a desperate attempt to review the “ailing” China economy.

Technically speaking, the Hong Kong 40 Index is now resting at a significant support of 24000 and short-term elements have started to show signs of a recovery. As long as the 24000 key pivotal support holds, the Index is likely to shape a rebound to retest the range top (resistance) at 24900.

On the other hand, a clear break below the 24000 support is likely to trigger a deeper decline to towards the key long-term support at 23450.

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