hang seng index weekly outlook 09 nov to 13 nov consolidation with 23260 as potential upside trigger

(Click to enlarge charts)

What happened last week

Despite a strongly rally see in the benchmark China A50 Index, the Hong Kong 40 Index (proxy for the Hang Seng Index) had another failed attempt to break above the stubborn trendline resistance from 26 May 2015 high as it traded sideways above the key neckline support of the “Double Bottom” bullish breakout at 22260/22180.

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

Key Economic Data Release/Events

• 10 Nov (Tues) – China Consumer & Producer Price Indices for Oct @0130 GMT
• 11 Nov (Wed) – China Fixed Asset Investment, Industrial Production & Retail Sales for Oct @5.30 GMT

Key elements

• The intermediate resistance for the Index is now at 23260 which coincides closely to the trendline resistance (in dotted red) from 26 May 2015 and the shorter-term trendline (in blue) joining the highs of 23 October 2015 @8pm & 04 November 2015 @8am (see 4 hour chart).
• The key support remains at 22260/22180 which is defined by the pull-back support of the “Double Bottom” bullish breakout and 38.2% Fibonacci retracement of the recent up move from 29 September 2015 low to 23 October 2015 high @8pm (see 4 hour chart).
• The daily (medium-term) RSI oscillator that gauges price momentum remains bullish above its support and the 50% neutrality level (see daily chart).
• The exit potential of the “Double Bottom” bullish breakout stands at 24120/24370 which also confluences closely with a graphical resistance seen between 27 July to 13 August 2015 and a Fibonacci cluster (50% Fibonacci retracement of the steep down move from 27 April 2015 high to 24 August 2015 low + 61.8 Fibonacci projection from 24 August 2015 low to 23 October 2015 high @8pm projected from the current low of 02 November 2015) (see 4 hour chart).
• Based on the Elliot Wave Principal, the Index is still in a midst of a corrective wave 4/ (a potential triangle configuration) below the 23260 intermediate resistance before a final bullish 5/ materialises to complete the larger degree wave (a) (see 4 hour chart).

Key levels (1 to 3 weeks)

Pivot (key support): 22260/22180

Resistance: 23260 & 24120/24370

Next support: 20290/20070

Conclusion

22260/22180 remains the medium-term key support for the Index and it needs to break above the 23260 intermediate resistance in order to gain impetus for a potential final push up to target the 24120/24370 zone.

On the other hand, failure to hold above the 22260/22180 pivotal support is likely to damage the medium-term bullish trend in place since the “Black Monday”, 24 August 2015 low for a deeper correction to towards the 20290/20070 range support linking the lows of 24 August and 29 September 2015.

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