hang seng index weekly outlook 31 aug to 04 sep potential last push down below 2200022710 1174742015

(Click to enlarge charts)

What happened last week

The Hong Kong 40 Index (proxy for the Hang Seng Index) has push up as expected below the 22710 intermediate resistance before it traded sideways towards the end of the week.

Please click on this link for more details on our previous weekly outlook.

Key elements

• Based on the Elliot Wave Principle, the Index is in a (a),(b),(c) “Flat” correction configuration of a larger degree wave B that has started from the high of 07 November 2010. From the 26 April 2015 high of 28600, current price movement is in the midst of undergoing the bearish (c) leg of the “Flat” correction that consists of a minimum of five waves from a lesser degree (see weekly chart).
• Last week price action has formed a weekly “Doji” which suggests that the bears are getting “indecisive” to push the Index lower beyond the “Black Monday”, 24 August 2015 low (see weekly chart).
• The significant intermediate-term resistance to watch now will be at 22710 which is defined by the former horizontal support linking the lows of 03 October 2014, 16 October 2014 & 08 July 2015  and the 50% Fibonacci retracement of recent steep down move from 21 July 2015 high @12pm to the 24 August 2015 low (see daily chart).
• The daily (intermediate-term) RSI oscillator remains bearish below its trendline resistance (see daily chart).
• On the shorter-term, the price action of the Index has appeared to evolve into a bearish continuation chart formation called “Pennant” (highlighted in dotted pink) from the low of 24 August 2015, “Black Monday”. The upper boundary (resistance) of the “Pennant” stands at 22000 (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)

Intermediate resistance: 22000

Pivot (key resistance): 22710

Support: 20070 & 19800/19400

Next resistance: 24900

Conclusion

Technical elements are still bearish. Expect a potential push up towards the intermediate resistance at 22000 (upper boundary of the “Pennant”) with a maximum limit set at the 22710 weekly pivotal resistance before a last leg down to retest the “Black Monday”, 24 August 2015 low of 20070.

On the other hand, a break above the 22710 pivotal resistance is likely to damage the bearish tone to see a squeeze up to test the trendline resistance joining the highs since 26 May 2015 at 24900.

Source:  Charts are from eSignal & City Index Advantage Trader

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