hang seng index weekly outlook 16 nov to 20 nov excess tolerated at the 2226022180 key support with

(Click to enlarge charts)

What happened last week

The Hong Kong 40 Index (proxy for the Hang Seng Index) has continued to trade below the “stubborn” trendline resistance (in dotted red) linking the lower highs since 26 May 2015.  In terms of performance, Hong Kong has clearly lagged behind its motherland, China. Since the “Black Monday”, 24 August 2015 low, the Hong Kong 40 Index has recorded a gain of only 17 % versus a return of 38% for the China A50.

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

Key elements

• Yesterday’s (16 Nov) price action has challenged the 22260/22180  key medium-term pull-back support of the “Double Bottom” bullish breakout before a gapped up above the support in today’s (17 Nov) morning session Therefore, yesterday’s slight breakdown below the 22260/222180 key support is considered as a “whipsaw”   (see daily chart).
• In conjunction, the daily (medium-term) RSI oscillator is still holding above their supports which reinforces the “whipsaw” that has occurred around the 22260/22180 key support (see daily chart).
• The intermediate resistance to watch now will be at 22870 which is the trendline resistance (in dotted red) linking the lower highs since 26 May 2015 (see daily & 4 hour charts).
•  The next 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 yesterday, 16 November 2015 and close to the exit potential of the “Double Bottom” bullish breakout.

Key levels (1 to 3 weeks)

Pivot (key support): 22260/22180 (with excess tolerated to 21830)

Resistance: 22870 & 24000

Next support: 20290/20070

Conclusion

Yesterday’s challenge on the 22260/22180 key medium-term support zone is considered as a whipsaw and also based on inter-market analyses across other major indices, it does not make sense to validate a deeper decline/correction on  the Hong Kong Index.

Right now, a break above the 22870 intermediate resistance is likely to trigger a bullish breakout for a potential rally to target the next resistance at 24000.

On the other hand, a clear violation below 21830 (excess) may see a deeper decline to retest the swing lows area of 24 August and 29 September 2015 at 20290/20070.

Disclaimer

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