hang seng index dip before new potential upleg above 23390200 support 1829922016

Daily Outlook, Tues 13 Sep 2016

(Click to enlarge charts)

What happened earlier/yesterday

The Hong Kong 50 Index (proxy for Hang Seng Index futures), one of the best outperforming major stock indices since the Brexit low on 24 June 2016 has succumbed to selling pressure as it shed 2.9% yesterday to print a low of 23150 after the horrendous single day plunge seen across the major U.S. stock indices on last Friday, 09 Sep 2016.

Interestingly, the decline seen in the Hong Kong 50 Index has managed to hold above the predefined 23200 intermediate support as per highlighted in our prior weekly technical outlook (click here for the details) as it staged a rebound in yesterday’s U.S. session.

Key elements

• Yesterday’s decline in price action has managed to stall at the 23200 support which is defined by the former minor swing high areas of 18 August/01 September 2016 (depicted by the blue boxes) and the 23.6% Fibonacci retracement of the ongoing advance from 24 June 2016 low to 09 September 2016 high of 24406.
• The daily (medium-term) RSI oscillator remains bullish above its support and the 50% level. These observations suggest that medium-term upside momentum of price action remains intact.
• The short-term (hourly) Stochastic oscillator has almost reached an extreme overbought level which highlights the risk of a short-term pull-back in price action at this juncture.
• The intermediate resistance stands at 23820 (gap).

Key levels (1 to 3 days)

Intermediate support: 23390

Pivot (key support): 23200

Resistances: 23820 & 24500

Next supports: 22700 (medium-term pivot)

Conclusion

Maintain bullish stance. The Index may see a minor pull-back first towards the intermediate support of 23390 before another potential upleg occurs towards 23820 before targeting the next resistance at 24500.

However, a break below the 23200 short-term pivotal support is likely to negate the preferred bullish tone for another round of slide to test the 22700 medium-term pivotal support.

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