Hong Kong’s Hang Seng cash index traded higher on Friday, breaking above the downside resistance line taken from the high of June 28th. Today, the index stayed above that line, which suggests that the bearish case may be off the table now. However, this doesn’t mean that we are confidently bullish. We prefer to wait for a break above the 25540 barrier, before we call for a bullish reversal.
That barrier is marked by the inside swing low of September 13th, and its break may open the path towards the high of September 10th, at 26215. If investors are willing to buy more, then we could see a break above that hurdle, and a test near 26540, which is the peak of September 8th, or near the 26890 zone, which is the inside swing low of July 21st. If neither territory is able to stop the advance, then a break higher may carry larger bullish implications, perhaps towards the peak of July 22nd, at 27755.
Shifting attention to our short-term oscillators, we see that the RSI turned somewhat down after it hit resistance slightly below its 70 line, while the MACD, lies within its positive territory, and slightly above its trigger line, but points sideways. Both indicators detect slowing upside speed, which adds some credence to our choice of waiting for a break above 25540.
We will start examining the bearish case again, only if we see a dip back below 24805, a support marked by the low of October 12th. This will take the index back below the aforementioned downside line and may pave the way towards the inside swing high of October 5th, at 24260, or the 23765 territory, which acted as a floor between September 21st and October 6th. If investors are not interested near that price either, then a dip lower may see scope for extensions towards the 22970 zone, marked by the low of September 29th.
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