Hang Seng Index and Shanghai Composite Index Technical Outlook: Bearish

HANG SENG, SHANGHAI COMPOSITE – Technical Outlook:

• The Hang Seng Index continues to make new lows.
• The Shanghai Composite Index dangers additional decline.
• How way more draw back for the indices and what are the important thing ranges to observe?

HANG SENG INDEX SHORT-TERM TECHNICAL OUTLOOK – BEARISH

A brand new 11-year low registered final week is an indication that the broader downtrend within the Hang Seng Index (HSI) stays intact. This follows a collection of assist breaks since early 2022, together with the very important 200-week transferring common, the 2020 low and the March 2022 low. With the Moving Average Convergence Divergence (MACD) indicator now firmly in destructive territory on the month-to-month chart, the downtrend is well-entrenched (MACD < 0 signifies a downtrend) and will probably lead in the direction of the subsequent vital assist on the 2011 low of 16170.

More just lately although, the downtrend seems to be dropping some momentum, as hinted at with constructive divergence (falling index costs alongside rising momentum indicators) and a bullish reversal candle on the weekly charts. While that is unlikely to change the general bearish outlook, it does increase the opportunity of some form of consolidation/minor rebound within the quick time period earlier than resuming its decline.

Hang Seng Index Daily Chart

Chart Created Using TradingView

One affirmation that the near-term pattern is shifting to sideways can be an increase above speedy support-turned-resistance on the March low of 18235, which may open the way in which in the direction of retesting the May low of 19179. Strong resistance appears to be marked by the 89-day transferring common: the index was final decisively above it in early 2021.

SHANGHAI COMPOSITE INDEX SHORT-TERM TECHNICAL OUTLOOK – BEARISH

As buying and selling resumes after the National Day holidays, the Shanghai Composite Index may proceed its decline after breaking under key assist on the decrease fringe of a rising channel set from March final month. While the index has achieved the goal of the triangle triggered in September, decrease lows on the each day charts earlier than the vacations are an indication that the bearish pattern stays intact.

Shanghai Composite Index Daily Chart

Chart Created Using TradingView

The subsequent assist is available in on the mid-May low of 2957, adopted by a stronger hurdle on the April low of 2864. The latter degree additionally marks the 200-month transferring common. The index hasn’t decisively damaged under that for the reason that Great Financial Crisis. Subsequent assist is on the 2020 low of 2647. An extra main threshold is on the 2019 low of 2441, and a decisive break under this may be very damaging to the big-picture outlook for 2 causes.

Firstly, the break under 2441 would set off a double prime sample on the month-to-month chart (marked by the 2018 and the 2021 highs), probably opening the way in which not less than in the direction of the 2013 low of 1850. Secondly, it will mark a break under the underside of a seven-year vary, probably resulting in an increase in volatility because the index finds a brand new equilibrium. On the upside, the index wants to interrupt above the August low of 3155 on the very least for short-term downward strain to ease.

— Written by Manish Jaradi, Strategist for DailyFX.com