Hang Seng and Shanghai Composite Index Technical Outlook: Bearish

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

• Looming bearish break within the Hang Seng Index.
• Potential extra draw back for the Shanghai Composite Index.
• What are the important thing ranges to look at?

HANG SENG INDEX TECHNICAL FORECAST – BEARISH

The Hang Seng Index’s (HSI) shut final week under an important long-term assist factors to additional weak spot in coming days/weeks. The index final week closed under long-term assist on a horizontal trendline from 2016 at 18,235 (see chart). Given the importance of the assist and the variety of instances it has been examined, it could be prudent to attend for at the least yet one more weekly shut under the assist.

To ensure, the likelihood of a break under the assist and the downtrend persevering with is rising. That’s as a result of the Moving Average Convergence Divergence indicator (MACD), a measure of pattern and the energy of a pattern, stays unfavorable throughout a number of timeframes. Moreover, the break earlier this yr under the 200-month shifting common, an uptrend line from 2008, and the March 2020 low confirmed that the big-picture uptrend has reversed.

An in depth this week under 18,235 might expose the draw back in direction of the 2011 low of 16,170, barely above 15,590 (the 78.6% retracement of the 2008-2018 rise). On the upside, there may be potential instant resistance on the May low of 19,179 and presumably stronger resistance on the finish August excessive of 20,185.

HANG SENG INDEXMonthly Chart

Chart Created Using TradingView

SHANGHAI COMPOSITE INDEX TECHNICAL FORECAST – BEARISH

The Shanghai Composite Index seems set to check assist at mid-May low of three,043, adopted by the early-May low of two,957. This follows a break final week under a barely upward sloping trendline from August which triggered a bearish breakout from a two-month lengthy triangle. The break under the trendline has opened approach in direction of 3,040, the value goal of the triangle sample.

Moreover, final week’s shut under the decrease fringe of a rising channel from April, the sample of ‘decrease lows’ since mid-September, and the MACD within the unfavorable territory reaffirm the medium-term downtrend. Cracks within the two-year uptrend that started in 2019 emerged after the index broke out of the vary and decisively fell under the 200-day shifting common (see chart).

Subsequent makes an attempt to recoup losses, whereas significant on smaller timeframe charts, weren’t sufficient to reverse the medium-term downtrend. The index would on the very least want to interrupt above the mid-September excessive of three,278 for the downward strain to fade. However, there is no such thing as a signal of reversal of the downtrend even on smaller timeframe charts because the index continues to make new lows on the every day charts.

SHANGHAI COMPOSITE INDEX Daily Chart

Chart Created Using TradingView

–— Written by Manish Jaradi, Strategist for DailyFX.com