Hong Kong’s Hang Seng traded higher today, after it hit support near the crossroads of the 25570 level and the upside support line drawn from the low of August 20th. Given that the index is trading above that line, and also above the prior downside resistance line drawn from the high of June 28th, we would consider the near-term outlook to be positive.
If the bulls are willing to stay in the driver’s seat, we could soon see them aiming for the 26435 barrier, the break of which could target the 26765 or 26900 barriers, marked by the high of August 11th, and the inside swing low of July 21st. A break higher could carry larger bullish implications, perhaps setting the stage for advances towards the peak of July 22nd, at 27770, where another break could aim for the high of July 16th, at around 28225.
Looking at our short-term oscillators, we see that the RSI rebounded and moved back above its 50 line, while the MACD, although below its trigger line, shows signs of bottoming slightly above its zero line. Both indicators suggest that the index is gathering upside speed again and support the notion for further advances.
On the downside, we would like to see a dip below 25570 before we abandon the bullish case. Such a move may confirm the break below the upside line drawn from the low of August 20th and may pave the way towards the low of August 31st, at around 25090. If that barrier doesn’t hold, then we could see the fall extending towards the low of August 20th, at around 24635.
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