Bullish trend was unexpected. The Hang Seng Index (HSI Index) jumped more than 1000 points for the week and performed against our forecasts. Nevertheless, with the rebound yet to hit overbought levels as measured by the 14-day RSI and with the index riding on a bullish Wave 5, we believe that the HSI could continue to build on the gains it made last week.
Immediate resistance is located at the 19,291 – 19,302 area where a series of daily highs are seen. North of that, stronger resistance is also available at the 19,854 – 19,869 region. On the other hand, initial support at the 17,896 – 18,030 range as outlined by the technical gap and the 50-day moving average would be present to cap any downside pressures. Stronger support is also seen at the 17,185 level.
Shanghai Composite Index: Resistance just ahead
Recording another string of gains. The Shanghai Composite Index (SHCOMP Index) continues to appreciate despite its overbought condition and we have thus revised our Wave Count to take into account this development. Given the steep climb and increment, we now believe that the current Wave 3 may have already reached exhaustion point when it hit a high of 3,221 last week as the move had roughly equated to the 161.8% fibonacci extension of Wave 1 at 3,231.
Risk-to-reward not favourable for going long. The risks are clearly against those who are looking to buy into the market at present levels, given that immediate resistance in the form of the upper bollinger band and the 161.8% fibonacci extension of Wave 1 is just around the corner at the 3,231 – 3,245 area. Should the index turn down, initial support is identified at the 3,076 – 3,088 region where a series of daily lows are seen. Further support is also available at the 3,011 – 3,015 area.
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