Our target for Hang Seng Index (HSI) is 16700. Swings, volume and RSI are all indicating a continuation in rally. Although the convergence of resistance is being tested now, we believe the odds are that the breakout is likely to be irresistible.
Hang Seng Index (HSI) is expected to retrace 38.2% of its down-leg from 26387 to 10663, which would be 16700.
The swings for 5-week time frame (blue line) has formed a higher lows and in the midst of forming a higher highs.
The rally is less likely to be short-lived or end any time soon as the increase in HSI has been coupled with strong volume.
Resistance level at 15795 is a key one in determining the subsequent movement. The 200-day moving average and resistance level defined by previous peak at 11th December 2008 are converging.
A convincing breakout for both resistance level and moving average is a necessary condition for a continuing bull trend.
At this juncture, we believe the odds are that the breakout is likely to be irresistible. As we can see from chart, the smaller time frames (white line and blue line) continue to form higher highs and higher lows.
Although the advance of RSI is slowing down, the signal given is still a positive one so long as it continues to tread above 50 level and also its corresponding 14-day moving average.
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