hang seng index weekly outlook 28 sep to 02 oct still holding above range support at 20800 142709201

(Click to enlarge charts)

What happened last week

The Hong Kong 40 Index (proxy for the Hang Seng Index) has retraced, tested and managed to stage a rebound at the 20860/20800 weekly pivotal support.

Please click on this link for a review on our previous weekly outlook.

Key elements

• The weekly (long-term) Stochastic oscillator has continued to inch upwards from its oversold region and still has room for further upside potential before reaching its extreme overbought level. This observation suggests that the multi-month downside momentum since late May 2015 has abated (see weekly chart).
• The Index is still holding above the “Black Monday”, 24 August 2015 low of 20070 which is also the low of the weekly “Long-legged” candlestick (see weekly chart).
• The daily (intermediate-term) RSI oscillator continues to exhibit mixed signals as it continues to hover above its pull-back support but remains stuck below its resistance/50% neutrality level (see daily chart).
• Since the  “Black Monday”, 24 August 2015 low of 20070, the Index has continued to evolved within a range configuration supported by an ascending trendline (as depicted by the yellow shaded boxes) now at 20800 and upper limit resistance at 22400 (see 4 hour chart).
• The next significant resistance stands at the 24000/24900 zone which is defined by the trendline resistance joining the highs since 26 May 2015 @8am and the 50% Fibonacci retracement of the down move from 26 May 2015 high @8am to 24 August 2015 low @8pm (see 4 hour chart).
• The significant long-term support stands at 19400 which are defined by the mega long-term ascending trendline in place since December 1987 and a Fibonacci cluster (see monthly chart).

Key levels (1 to 3 weeks)

Pivot (key support): 20800

Resistance: 22400 & 24000/24900

Next support: 20070 & 19400 (long-term)

Conclusion

As long as the 20800 weekly pivotal support (lower limit of the range configuration) holds, the Index still has the potential to shape a push up to test the range upper limit (resistance) at 22400 in the first step. Only a clear break above the 22400 level is likely to trigger a further rally towards the 24000/24900 resistance zone.

However, failure to hold above the 20800 pivotal support may see a slide to retest the “Black Monday”, 24 August 2015 low of 20070.

Source:  Charts are from eSignal & City Index Advantage Trader

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