hang seng index weekly outlook for 10 aug to 14 aug 24900 remains the potential upside trigger level

(Click to enlarge charts)

What happened earlier

The Hong Kong 40 Index (proxy for the Hang Seng Index) has traded sideways with a range of 900+ points within 24900 and 24000.

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

*Please note that the weekly candlestick for 06 July to 10 July 2015 is erroneous as it did not have a weekly close below the 23450 support. This error will be rectified as soon as possible. 

Key elements

• The Index is now testing its intermediate range top (resistance) at 24900 (see 4 hour chart).
• The intermediate term RSI oscillator remains above its support which suggests that the downside momentum is being contained at the moment (see daily chart).
• The intermediate range support stands at 24000 which confluences with the 50% Fibonacci retracement of the up move from 08 Jul 2015 low @12pm to 21 Jul 2015 high @12pm (see 4 hour chart).
• The short-term Stochastic oscillator is now right below its extreme overbought level which suggests limited upside potential for the Index at the current price level. An imminent pull-back is round the corner (see 4 hour chart).
• The next significant resistance zone will be at 26400/ 27000 which confluences with a Fibonacci cluster (61.8%/76.4% Fibonacci retracement from 27 Apr 2015 high @12pm to 08 Jul 2015 low @12pm + 1.00 Fibonacci projection from 08 Jul 2015 low @12pm to 27 Jul 2015 low @8pm) (see 4 hour chart).

Key levels (1 to 3 weeks)

Pivot (key support): 24000

Resistance: 24900, 26400/27000

Next support: 23450 & 21170

Conclusion

The Index needs to break above the intermediate range top (resistance) at 24900 to trigger a further potential rise to target the 26400/27000 resistance zone.

However, failure to hold above the key 24000 weekly pivotal support is likely to damage the bullish expectation for a slide to test the long-term trendline support (see weekly chart) at 23450. Only a clear break below 23450 is likely to unleash the start of a severe correction to target the next support at 21170 in the first instance.

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