hang seng index weekly outlook 07 dec to 11 dec poised for a potential bullish breakout 1789542015

(Click to enlarge charts)

What happened last week

The Hong Kong 40 Index (proxy for the Hang Seng Index) has managed to stage a rebound from the lower limit of the weekly pivotal support at 21830 but failed to break above the “stubborn” trendline resistance at 22600 again.

Please click on this link for a review on our prior weekly outlook/strategy.

Key elements

• The Index has another attempt (the 4^th time since 25 May 2015) to test the trendline resistance that is linking the lower highs since 26 May  2015 at 22600 but failed to make a break through (see 4 hour chart).
• The volatility of the Index as measured by the “Bollinger Bandwidth” has reached a low level of 0.04 which is the lowest since early June 2015. This observation suggests that the price action of the Index is due for a highly volatile breakout from its current phase of consolidation that has lasted for 1.5 months in place since 23 October 2015 high (see daily chart).
• The daily (medium-term) RSI oscillator that measures price momentum is now turning up from its supports which represent a revival in upside momentum (see daily chart).
• The next medium-term significant resistance stands at 24000 which is a graphical former support turns pull-back resistance seen from 27 July to 14 August 2015, the 61.8 Fibonacci projection of the up move from 24 August 2015 low to 23 October 2015 high @4pm projected from 16 November 2015 low and close to the exit potential of the “Double Bottom” bullish breakout (see 4 hour chart).

Key Levels (1 to 3 weeks)

Pivot (key support): 22260/21830 (excess)

Resistance:  22600, 23530 & 24000

Next support: 20290/20070

Conclusion

Medium-term technical elements are advocating for volatility breakout.  Right now, a clear break above the 22600 intermediate resistance (the “stubborn” descending trendline) is likely to trigger a bullish breakout to retest the 23 October 2015 swing high at 23530 before targeting the significant medium-term resistance at 24000.

However, a break down below the key 22260/21830 (excess) weekly pivotal support is likely to invalidate the expected bullish expectation to see a deeper decline to retest the swing lows area of 24 August and 29 September 2015 at 20290/20070.

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