hang seng index maintain bullish bias above 21700600 support 1824792016

Daily Outlook, Thurs 04 Aug 2016

(Click to enlarge charts)

What happened earlier/yesterday

The Hong Kong 50 Index (proxy for Hang Seng  Index futures) has gapped down earlier on Wednesday, 03 August after it reopened for trading after a whole day closure on Tuesday, 02 August due to typhoon. Interestingly, the Index has declined by 2.6% from Monday, 01 August high of 22265 and this decline has managed to stall at the 21700/600 medium-term pivotal support set for this week.

Please click on this link for a recap on our latest weekly technical outlook/strategy published earlier on Monday, 01 August 2016.

Key elements

• The 21700/600 medium-term pivotal support is defined by the lower boundary of a short-term ascending channel in place since 24 June 2016 low (Brexit) and the 23.6% Fibonacci retracement of the on-going rally from 24 June 2016 low to Monday, 01 August 2016 high.
• The upper boundary (resistance) of the aforementioned ascending channel now stands at 22810/900 which also confluences with a Fibonacci projection cluster (see 4 hour chart).
• The 4 hour Stochastic oscillator has exited from its oversold region and still has room to manoeuvre to the upside before reaching an extreme overbought level. These observations suggest a revival of short-term upside momentum in price action.

Key levels (1 to 3 days)

Pivot (key support): 21700/600 (medium-term)

Resistances: 22265 & 22810/900

Next support: 21380

Conclusion

Maintain bullish bias. As long as the 21700/600 medium-term pivotal support holds, the Index is likely to stage another round of potential upleg to retest this Monday, 01 August minor swing high at 22265 before targeting the next resistance at 22810/900.

On the other hand, failure to hold above the 21700/600 medium-term pivotal support may invalidate the preferred bullish bias for a deeper slide to retest the pull-back support of the former “triangle range” bullish breakout at 21380.

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