The Hong Kong’s Hang Seng cash index edged north during the Asian trading Tuesday, breaking above the downside resistance line drawn from the high of June 28th. In our view, this has dismissed the bearish case, but it has not yet confirmed a bullish reversal. Therefore, for now, we will stay neutral.
We believe that a bullish reversal will be confirmed upon a break above 25950, the high of August 25th. This will confirm a forthcoming higher high on the 4-hour chart and may pave the way towards the 26435 zone, marked by the high of August 16th, or the 26765/26900 territory, defined by the high of August 11th and the inside swing low of July 21st. If neither area is able to halt the advance, then we could experience extensions towards the 27770 hurdle, marked as a resistance by the high of July 16th.
Shifting attention to our short-term oscillators, we see that the RSI rebounded back above 50, but just turned down, while the MACD lies slightly above both its zero and trigger lines. Both indicators suggest that the momentum has turned positive, but the downtick of the RSI make us a bit cautious and enhances our choice to wait for a move above 25950 before we get confident on more advances.
On the downside, a dip below 24635 is the move that would make us assess whether the bears have gained the upper hand again. This would confirm a forthcoming lower low on both the 4-hour and daily chart and may open the path towards the 24000 zone, marked by the lows of October 15th and 30th. If that area does not hold either, then the fall could extend to the 23310 territory, marked by the low of September 30th.
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