Hong Kong’s Hang Seng cash index traded higher Thursday, after it hit support slightly below 24615 on Wednesday. However, today, the cash index pulled somewhat back. Overall, it looks to be forming a possible “Inverted Head and Shoulders Formation”, but until we see a break above the neckline, we prefer to stay sidelined.
A possible break above 26215 could confirm the break above the neckline and thereby, the completion of the formation. The next couple of resistances are very close to each other, and thus, the move that could see scope for strong advances may be a break above 26890. This may allow the investors to push towards the 27755 or 28225 areas, marked by the highs of July 22nd and 16th respectively. Now, if neither territory is able to stop the advance, then we could see extensions towards the high of June 28th, at 29365.
Shifting attention to our daily oscillators, we see that the RSI moved above 50, but has just turned down, while the MACD, although it shows signs of bottoming, it stays below both its zero and trigger lines. Both indicators suggest that the index may start gathering upside speed soon, but until that happens, we will stay neutral.
On the downside, a break below the right shoulder, at around 24615, or even better, below 24260, could discard the H&S formation and may encourage the bears to push towards the 23765 zone, which provided strong support between September 21st and October 6th. If they are not willing to stop there, then we may experience extensions towards the 22970 or 22500 territories, marked by the lows of September 25th and May 25th, 2020.
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