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Chart of the day Hong Kong 50 may see bullish acceleration

Short-term technical outlook on Hong Kong 50 Index (Hang Seng) (Fri, 03 Nov)



Key technical elements

  • The Hong Kong 50 Index (proxy for Hang Seng Index futures) had not made any headway for the past two weeks after it hit a 2-year high area of 28800 on 16 October 2017. Interestingly, it has traced out an impending bearish “Head & Shoulders” configuration. Current price action has managed to stage a break above 28545 (resistance of the “right shoulder”) which negated the bearish “Head & Shoulders” configuration.
  • Both 4 and 1-hour Stochastic oscillator has started to inch higher and still has room for further potential upside before it reaches their respective extreme overbought levels. These observations suggest that short-term upside momentum of price action has started to resurface.
  • The intermediate support now rests at 28545 which is defined by the former minor resistance of the “right shoulder” and the former minor descending trendline that has capped previous rallies since its 2-year high area of 28800 on 16 October 2017 (depicted in dotted green (see 1 hour chart).
  • The key short-term support now rests at 28340 which is defined by the former minor swing high area of 31 October 2017 and the minor ascending trendline from 25 Oct 2017 (depicted in light green (see 1 hour chart).
  • The next significant short-term resistance stands 29100/130 (upper boundary of a minor ascending channel from 31 Oct 2017 low and the 1.618 Fibonacci projection of the up move from 25 Oct low to 30 Oct 2017 high projected from the 31 Oct 2017 minor swing low).

Key Levels (1 to 3 days)

Intermediate support: 28545

Pivot (key support): 28340

Resistances: 28800 & 29100/130

Next support: 28240/28000 (medium-term pivot)

Conclusion

After it has lagged before its peers such as the S&P 500, Nikkei 225 and DAX for the past two weeks, technical analysis on the Hong Kong 50 Index (proxy for Hang Seng Index futures) has suggested that it may start to see a bullish acceleration at this juncture.

Therefore as long as the 28340 short-term pivotal support holds, the Index is likely to see a potential up move to retest its former swing high area of 28800 before targeting next short-term resistance of 29100/130 in the first step.

On the other hand, a reintegration back below 28340 shall see another round of choppy corrective decline to retest the 28240/28000 medium-term pivotal support zone.

Charts are from City Index Advantage TraderPro

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