Market News & Analysis
Featured Trade: Hang Seng squeezed up to key medium-term range resistance
Kelvin Wong January 9, 2019 1:41 PM
Short-term technical outlook on Hong Kong 50 (Wed, 09 Jan)
The Hong Kong 50 Index (proxy for the Hang Seng Index futures) had rallied by 3.2% to print a current intraday of 26613 seen in today, 09 Jan Asian session since the start of the on-going U.S. and China trade talk on Mon, 07 Jan 2019.
Its recent push up in conjunction with the major benchmark U.S. stock indices; the S&P 500 and Nasdaq 100 has been led by “an air of optimism” around the trade negotiations between U.S. and China. The trade talk has extended to a 3rd day and expected to conclude today, 09 Jan. Media outlets had quoted several U.S. officials that the on-going discussions went well and even U.S. President Trump tweeted that “Talks with China are going very well!”
There are no official statements out yet on the details of the talks from both sides. Interestingly, trade hawks in the U.S. White House administration are not backing down from the current positive vibes where Bloomberg has reported that President Trump is expected to lobby Congress in his State of the Union address later on 29 Jan 2019 to pass a new legislation that will give Trump broad authority to increase U.S. tariffs if he considers other countries’ tariff and non-tariff measures to be too restrictive. The bill is crafted by White House trade adviser Peter Navarro’s office (a vocal trade hawk), together with the Trade Representative’s office and the Commerce Department.
Key technical elements
- The on-going rebound seen in the Hong Kong 50 Index is now approaching the key medium-term resistance level of 26740 which is defined by the upper boundary of a medium-term “triangle range” configuration in place since 26 Sep 2018 high (see daily chart). Click here for a recap on our latest weekly technical outlook.
- The on-going rebound from 03 Jan 2019 low of 24886 is similar in terms of fractals geometry with the previous rebound seen from 26 Oct 2018 low of 24484 to 03 Dec 2018 high of 27294 before it declined by 8.6% to print the 03 Jan 2019 low of 24886. The 26740 key medium-term resistance level confluences with a Fibonacci retracement/expansion cluster (76.4% retracement of the recent decline from 03 Dec 2018 high to 03 Jan 2019 low & 0.764 expansion of the recent rebound from 03 Jan 2019 low to 07 Jan 2019 minor swing high projected from 09 Jan 2019 minor swing low (see 1 hour chart).
- Volatility has started to increase significantly, and it is likely to be coming close to a potential tipping point for a downward mean reversion in price action. Current price action of the Index has traded above the upper Bollinger Band by 3 consecutive hourly candlesticks and a similar observation was seen prior to the 8.6% decline from the 03 Dec 2018 high of 27294 (see 1 hour chart).
- The 1-hour Stochastic oscillator has reached an extreme overbought level.
- The significant near-term supports rest at 26080 (the former minor swing high areas of 20 Dec 2018 & 07 Jan 2019) and 25745 (lower limit of minor congestion zone formed on 07/08 Jan 2019).
Key Levels (1 to 3 days)
Pivot (key resistance): 26740/800 (medium-term pivot)
Supports: 26080 & 25745
Next resistance: 27250
The current rebound seen in the Hong Kong 50 Index has appeared to be overextended where the risk of a mean reversion decline increases at this juncture. If the 26740/800 key medium-term pivotal resistance is not surpassed, the Index may see a slide to target the near-term supports of 26080 and 25745 in the first step.
However, a clearance above negates the bearish tone for an extension of the corrective rebound to retest the 03 Dec 2018 swing high area of 27290.
Charts are from City Index Advantage TraderPro
This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.
GAIN Capital Singapore Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the GAIN Capital group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), GAIN Capital Singapore Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact GAIN Capital Singapore Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.
In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither GAIN Capital Singapore Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.
GAIN Capital Singapore Pte. Ltd. is not under any obligation to update this report.
Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit cityindex.com.sg for the complete Risk Disclosure Statement.
Cryptocurrencies are not legal tender currency and trading of derivatives on Cryptocurrencies are currently not covered under any regulatory regime in Singapore. Consequently, investors should be aware they do not have protection under the Securities and Futures Act (Cap. 289). Please ensure that you are fully aware of the risks.