hang seng index weekly outlook 30 nov to 04 dec back at 2226021830 key support 1787192015

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What happened last week

The Hong Kong 40 Index (proxy for the Hang Seng Index) has tested the “stubborn” trendline resistance linking the lower highs since 26 May 2015 again (fourth attempt) but failed to establish a clear breakout from it.

Last Friday 27 November 2015, the Index has recorded a drop of 2.26% from its open, the worst single day decline since 24 September 2015 in line with the China stock market as the China Securities Regulatory Commission launched fresh probes for “business irregularities” in two largest mainland brokerages, Citic Securities and Guosen Securities.

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

Key Economic Data Release/Events

• 01 Dec (Tues) – China Non-manufacturing PMI for Nov @0100GMT
• 01 Dec (Tues) – China NBS Manufacturing PMI for Nov @0100GMT
• 01 Dec (Tues) – China Caixin Manufacturing PMI for Nov @0245GMT
• 03 Dec (Thurs) – China Caixin Services PMI for Nov @0145GMT

Key elements

• The recent decline has led the Index to retest the previous “whipsaw low” just below the pull-back support of the “Double Bottom” bullish breakout at 21830 (see daily chart).
• The daily (medium-term) RSI oscillator is now also resting at its supports (see daily chart).
• The intermediate resistance is still the descending trendline linking the lower highs since 26 May 2015 now at 22600 (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 16 November 2015 low and close to the exit potential of the “Double Bottom” bullish breakout (see 4 hour chart).
• The 4 hour (short-term) Stochastic oscillator has just exited from the oversold region which suggests a revival in upside momentum (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

The technical view remains the same and the Index is required to break above the 22600 intermediate resistance (the “stubborn” descending trendline) in order to trigger a potential upside movement to target the 23 October 2015 swing high at 23530 before the significant medium-term resistance at 24000.

On the other hand, a break down below the key 22260/21830 (excess) weekly pivotal support is likely to invalidate the expected bullish tone 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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