Hang Seng and Shanghai Composite Index Technical Outlook: At Crossroads

Title:

Hang Seng and Shanghai Composite Index Technical Outlook: At Crossroads

Teaser:

The Hang Seng Index is at a significant assist stage, whereas the Shanghai Composite Index has witnessed a pattern breakdown. What is the technical outlook for the indices?

Body:

Hang Seng Index, Shanghai Composite Index, China/Hong Kong Equities – Technical Outlook:

• Is it make or break for the Hang Seng Index?
• Shanghai Composite Index dangers additional weak spot.
• Are there any indicators of a turnaround and what are the important thing ranges to look at?

HANG SENG INDEX TECHNICAL FORECAST – BEARISH

The Hang Seng Index appears deeply oversold because it approaches key technical assist, pointing to some consolidation and or rebound. However, there may be loads of resistance to cap any rebound, retaining the general medium-term downward bias intact.

After closing at a brand new 6.5-year low final week on the chart under, Hong Kong’s benchmark index is testing essential long-term assist on a horizontal trendline from 2016 at 18,235. This stage is powerful, and a break under is not at all imminent. Indeed, with the Relative Strength Index (RSI) under 35 throughout intraday and better timeframes, the index may rebound a bit within the quick time period.

However, any rebound is unlikely to be substantial given a collection of resistance beginning with final week’s excessive of 19,492, adopted by the end-August excessive of 20,185. For the medium-term downward strain to ease, the index would want to interrupt above the June excessive of twenty-two.449, barely above the 200-day shifting common.

Until then, the big-picture downtrend stays intact – the Moving Average Convergence Divergence indicator (MACD), a measure of pattern and power of a pattern, stays damaging throughout a number of timeframes. A decisive break under 18,235 may initially pave the best way in direction of an inner downtrend line inside a declining channel from 2015 (now at about 17,820), probably in direction of the 2011 low of 16,170 (see chart).

HANG SENG INDEX Monthly Chart

Chart Created Using TradingView

SHANGHAI COMPOSITE INDEX TECHNICAL FORECAST – BEARISH

The break this week under necessary technical assist signifies that the Shanghai Composite Index may fall additional within the coming days or perhaps weeks. The fall under a barely upward sloping trendline from August has triggered a bearish breakout from a triangle, pointing to a fall in direction of 3,040, the value goal of the sample.

Triangles are continuation patterns, and a breakout from the sample sometimes signifies a resumption of the prior pattern in drive. For China’s onshore benchmark index, the pattern has been down since June, when it failed to interrupt previous robust resistance on the 200-day shifting common, coinciding with the higher fringe of the rising channel from March.

There is pretty sturdy assist on the decrease fringe of the channel (now at about 3,100). Previous checks of inner trendlines throughout the channel have led to both transient pauses and even pattern reversals. So, a minor rebound this time round wouldn’t be stunning. Still, any potential rebound may encounter hurdles, beginning with the early-September low of three,174 adopted by the mid-September excessive of three,278.

SHANGHAI COMPOSITE INDEX Daily Chart

Chart Created Using TradingView

— Written by Manish Jaradi, Strategist for DailyFX.com

To contact Manish, use the feedback part under.