hk stock focus potential medium term bearish toppish formation seen in icbc 1851162017

Medium-term technical outlook on Industrial & Commercial Bank of China (ICBC) (HKG:1398)

(Click to enlarge charts)

Key technical elements

• The year-long up move from 12 February 2016 has reached a significant medium-term resistance level of 5.27 which is defined by confluence of elements. The upper boundary pf the ascending channel in place since 12 February 2016 low, the swing high area of 26 October 2015 and the 0.618 Fibonacci projection of the rally from 12 February 2016 low to 09 September 2016 high.
• The daily RSI oscillator has shaped a bearish divergence signal and it is now coming down to test its ascending trendline support in place since January 2016. These observations suggest that downside momentum of price action has resurfaced.
• The recent price action of ICBC has traced out a potential medium-term bearish  “Top” with its  neckline support at 4.90.
• The significant medium-term support rest at the 4.46/30 zone which is defined by the 61.8% Fibonacci retracement of the rally from12 February 2016 low to 21 March 2017 high, the congestion area from 23 June to 23 December 2016 and the lower boundary of the ascending channel.
• The relative strength chart of ICBC versus the benchmark Hang Seng Index (HSI) continues to advocate a potential underperformance of ICBC against HSI.

Key levels (1 to 3 months)

Pivot (key resistance): 5.27

Supports: 4.90 (downside trigger) & 4.46/30

Next resistance: 5.85

Conclusion

Therefore as long as the 5.27 pivotal resistance is not surpassed and a break below 4.90, ICBC is likely to shape a potential downleg to target the 4.46/30 support zone before a recovery materialises.

However, a clearance above 5.27 may invalidated the preferred medium-term bearish scenario to open up scope for a further up move towards the next resistance at 5.85.

Charts are from eSignal

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