hang seng index holding above 22740 key short term support with improving momentum 1828052016

Daily Outlook, Thursday 25 Aug 2016

(Click to enlarge charts)

What happened earlier/yesterday

The Hong Kong 50 Index (proxy for Hang Seng Index futures) has staged an initial decline of 1.5% in yesterday’s Asian morning session but the decline has managed to stall at the predefined 22740 short-term pivotal support. It has printed a low of 22689 but it inched back up above 22740 and traded sideways for the rest of the Asian session.

Please click on this link for a recap on our previous daily short-term technical outlook/strategy.

Key elements

• Yesterday’s decline has also managed to test and hold at the lower boundary (support) of the medium-term bullish ascending channel in place since 24 June 2016 low (see 4 hour chart).
• Momentum indicators are suggesting a revival in upside momentum of price action. Both the 4 and 1 hour Stochastic oscillators have managed to inch up just above their respective oversold regions.
• The significant short-term resistance remains at 23500 which is the upper limit of the 23200/500 risk zone where a pull-back may materialise (click here to recap on the details as per highlighted in our latest weekly outlook/strategy published on Monday, 22 August).

Key levels (1 to 3 days)

Pivot (key support): 22740

Resistances: 23160 & 23500

Next support: 22200 (medium-term)

Conclusion

Maintain short-term bullish bias as 22740 short-term pivotal support continues to hold with improving momentum. The Index is likely to see a potential recovery to retest the minor range top at 23160 before targeting the next resistance at 23500.

However, failure to hold above the 22740 short-term pivotal support may invalidate the preferred recovery scenario to open up scope for a deeper slide towards the medium-term pivotal support of 22200

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