Vacation (2011-05-29)

I will be having a trip to Singapore this week, so I will not be able to update these few days. See you next week.

Important levels (2011-05-27 HSBC 0005.HK analysis)

Hang Seng Index surged over 150 points yesterday, closing at above 22,900. That means on weekly chart, the index was still within the triangle, and above the horizontal resistance, which might turn to support again.

Today let's see how the biggest component of HSI, HSBC (0005.HK), would move in order to predict how the index would go at the end of this week.



Above is the daily chart of HSBC (0005.HK). After reaching the support zone at 78.0-78.9, the stock price bounced yesterday.

There are two down-trend lines: red one indicates a short-term trend and purple is a medium-term trend.

HSBC is still below these two lines, meaning that they would both act as resistance to the stock price.

The red one gives resistance at around 80.70 and purple at around 81.80. However, we can anticipate that the selling force at 80.70 would not be that powerful as the short-term down-trend was too rapid and the slope is too steep.

Volume jumped, which was a good news to the stock market. It has a great chance to rise to at least the resistance level at 81.8.

So be aware of these levels: 78.0-78.9 and 80.7,81.80 which are major supports and resistances.

Trend Reversal (2011-05-26 GBP/USD analysis)

Two days ago I posted an analysis on USD Index, and concluded that it broke out the horizontal resistance line and was facing another strong resistance. After that, DXY consolidates at current level and wasn't able to break further upwards.

Interestingly, I found a breakout pattern on the British Pound. This might somehow indicates that US Dollar Index could not make its way above the resistance.

Above is the 4-hour chart of GBP/USD. Surprisingly extremely obviously, the Pound just broke out the red down-trend channels.

The most upper line is supposed to be quite a strong one, as the price of sterling has been below this line since the start of May.

Breakout of this line signals a strong reversal of trend. It seems like GBP has bottomed at 1.60 and started to move upwards.

Next resistance would be at around 1.63. This is the previous high and the 161.8% fibonacci level using the previous short-term up-trend wave as reference.

Breakout (2011-05-24 DXY analysis)

Above is the daily chart of US Dollar Index (.DXY). Due to the financial debt concerns in Europe, the Euro has slumped greatly, causing a great surge in USD and hence .DXY as it consists of more than half Euros.

We can see that the index just broke a major resistance level. This breakout signals a change to bullish trend of US Dollar. Investors should be aware of it.

Using the high and low in 2011, I drew a fibonacci retracement. 50% level is at around 77.0, and this would be the next selling-level for US Dollar.

The red down-trend line is another resistance. It is actually quite strong as the index has not been above it since the Dollar started to fall. We can expect a huge selling force at around 76.8.

Therefore, the next challenge for the index would be around 76.8-77.0. For downside, we can expect the level of 76 turns to support after the breakout. So this level would be the support line.

Unclear Market (2011-05-23 HSI analysis)

Just a short summary of HSI last week, the index first fell to around 22,750 but then bounced, closing at 23,200.

Last week S&P downgraded Italy's outlook to negative, and investors were concerned about Greece's financial status (again), leading the Euros and stock markets to plunge. Fundamentally, Hong Kong market should somehow follow the down-trend due to the "concern".

One more important thing is that Milan Station will be listed today, this might result in a crazy capital inflow (the frozen capital for IPO), and crazy speculation on the market (Milan Station rose more than 50% in grey market trading). Nevertheless, these would cause high volatility.

Daily chart of Hang Seng Index (.HSI):


After almost forming a doji (with very short body) last week, the index bounced and closed at 23200. Interestingly, this level is a resistance because of the red down-trend line.

Furthermore, 20-day SMA also closed near this level, signaling a further resistance to HSI.

We can see the MACD and its EMA just touched each other, possibly forming a bullish cross which suggests a bullish market. But the shrinking volume might prohibit its formation.

Weekly chart of HSI:


On weekly chart, the index looks even worse. The slump in the beginning of last week brought the index below the 50-day Simply Moving Average. Then the index struggled to retrieve its position above the SMA, but obviously failed and closed just below the Average.

On the other hand, the index is still within the triangle formed by green and red solid lines. I predicted an increased volatility due to breaking of this area last week, but it didn't happen. Let's see whether it would happen this week.

Red dotted line is an unimportant line now as its levels are rising way too far. Green dotted line could possibly be the next bottoming indicator if the index breaks downwards.

The future market movement still appears to be quite unclear. While the index is in middle of the area on weekly chart, it might be a good choice to stay away and wait for the next signal, which would be the breaking of the area.

Bearish Flag Continuation (2011-05-22 XAG, SLV analysis)

I received an e-mail asking my opinion on Silver and iShares Silver trust SLV. First thanks very much for your e-mail. I love to share ideas with others which we can learn from each other and so if you have any comments/feedback/questions, please e-mail me so we can further discuss. :)

Back to Silver and SLV. Actually SLV is the ETF for Silver, so the two charts look more-or-less the same.

Daily chart of SLV:


Daily chart of XAG:


The long red line is the medium-term up-trend line, which obviously has little meaning now after the severe huge slump of Silver price in late April.

After the breakdown, it seems like the price is fluctuating a lot. However, by carefully analyzing, I discovered a pattern there.

We can see that when the price boosted, it usually stopped at almost the same level (around $36 for XAG and $34.6 for SLV). While for the downside, the low was rising, forming an upward sloping support there.

Also, the volume was dropping. This is more obvious in XAG chart. All the criteria for a bearish flag continuation pattern are met.

Therefore, I would expect a further drop in Silver price (of course SLV would follow). When the breakdown confirms, it will be a good time to SHORT Silver.

Important Economic Data this week (2011-05-22)

24-May (Tuesday)
14:00 Germany GDP {Forecast: Unchanged}
22:00 US New Home Sales {Forecast: Slight increase}

25-May (Wednesday)
16:00 UK GDP {Forecast: Unchanged}
20:30 US Durable Goods Orders {Forecast: Change from 4.1% to -2.5%}

26-May (Thursday)
17:20 ECB President Jean-Claude Trichet speaks on European Economy
20:30 US GDP {Forecast: Increase from 1.8% to 2.2%}

27-May (Friday)
20:30 US Personal Income {Forecast: Slight decrease}

source: http://dailyfx.com

Consolidation time (2011-05-19 US Dollar Index analysis)

Above is the daily chart of US Dollar Index (.DXY). Since May, the index has been rising from around 72.8 to as high as 76.

I have identified three down-trend lines using the same peak as starting point. Red line would be the ultimate resistant while green line is the ultimate support which I don't think the index would touch again.

The purple line is somewhere in between. Few days again DXY actually broke the purple line from below. Now this line has changed its role and it is supporting the index.

However, the small horizontal channel seems to be difficult to break out. We can see that this area has supported/resisted the index for a few times. We can expect a selling-force at this area.

It is still uncertain which one will win, the purple support or the horizontal resistance. Other indicators such as high RSI and high MACD suggest that the momentum of bullish USD should probably drop a bit. That means it should not have enough power to break out. I expect a consolidation of the index between the two levels.

Another Small-cap Stock (2011-05-18 Dynamic Energy analysis)

Above is the daily chart of Dynamic Energy Holdings Ltd. 0578.HK. This company mainly produces and sells coal in China.

From the chart, we can see that starting from December 2010, after 4-month suspension because of operations sales (which was announced unsuccessful), the stock price has been rising crazily from 0.33 to as high as 0.74.

Fundamentally, the main reason would be the rise of coal price and its continuing operations of the coal mines. But I guess the best explanation would be some corporate investors are "playing" with this stock. It is shown by the abnormal large volume when compared to that before suspension.

0.33 to 0.74 there is around 124% gain. Would these guys be satisfied? Probably Not. They have spent over a year to collect stocks, and there was even news popping up. Having done a lot, would these investors be willing to let go for just 124%?

Another good signal would be the doji in last April, followed by a trading day with extremely huge volume. The doji would probably be a fake signal asking retail investors to sell (fake evening doji). Then, on the next day, the corporate investors continued collecting more shares.

Therefore, I would expect further rise of this energy stock. The price now is 0.72, and 0.74 would be the next resistance. If it breaks out, we should buy without hesitation.

Of course, remember to set a stop loss level when "investing" or speculating these kinds of small-cap stocks.

Time to choose (2011-05-17 SSEC analysis)

Hang Seng Index was unable to remain above 23,000 yesterday and closed at 22960. We could see the China markets were plunging as well, but EU and US markets showed no sign of great slump. Therefore, we could comfortably assume a close relationship between HK markets and China markets in near future.

Next, I have analyzed Shanghai Composite Index (.SSEC).



Above is the daily chart of SSEC. The green line is a long-term up-trend line which is expected to provide support now, as the index is touching the line.

On the other hand, the red is a medium-term down-trend line which would resist the index from surging beyond it.

While the two lines are converging, it is time for SSEC to choose which side to break, just like the situation HSI is facing now.

Though yesterday HSI is trying to break down, the magnitude from the support and close wasn't that large. We could still treat it as "above the support".

And then it would all depend on how the China market moves. If SSEC bounces tomorrow, we should see HSI follow.

If SSEC breaks downwards, then we have to observe and see whether to confirm a break down for HSI or not. Normally, we can confirm if HSI is still below the support this Friday.

Breakout time? (2011-05-16 HSI analysis)

Last week was an interesting week. News reported that many investors from China had liquidated their SHORT positions in HSI futures or changed from SHORT to LONG positions, causing HSI to have bounced.

However, analyzing the charts, I am still not convinced that the bearish trend has ended.

Daily chart of Hang Seng Index:


The index bounced greatly last Friday, forming a white candle with long lower shadow. However, the surge stopped at exactly the 10-day Simple Moving Average.

Besides the SMA, HSI is still below the red down-trend line. This line provides strong resistance which we can observe last Wednesday. This time the level is at around 23,300.

The fibonacci retracement using the high and low these two months again further shows a resistance force (at around 50%-level) to the index. But this is relatively weak.

For the downside, 23,000 level seems to have well supported the index last week. This level should still be working.

Weekly chart of HSI:


Last week's candle was almost a doji as the open and close were very close. The body beautifully lied between the purple down-trend line (resistant) and the 50-day SMA (support).

The low was also at the green up-trend line. This line has been supporting the index very well.

While the two lines have converged, it is time for the index to break. Volatility would increase this week.

It is hard to guess which side the index will move by looking at the charts solely. However, due to the fact that more rich investors (from China) are having bullish view on HSI, I would expect an upside breakout.

Important Economic Data this week (2011-05-15)

16-May (Monday)

17:00 Europe Consumer Price Index {Forecast: Slight increase}

21:00 US Bernanke Speech

17-May (Tuesday)

09:30 Reserve Bank of Australia Meeting Minutes

16:30 UK Consumer Price Index {Forecast: Slight increase}

18-May (Wednesday)

16:30 Bank of England Meeting Minutes

16:30 UK Jobless Claims Change {Forecast: Drop}

19-May (Thursday)

02:00 US FOMC Meeting Minutes

07:50 Japan GDP {Forecast: More negative}

22:00 US Existing Home Sales {Forecast: Slight increase}

20-May (Friday)

Bank of Japan Interest Rate Decision {Forecast: Unchange}

19:00 Canada Consumer Price Index {Forecast: Slight decrease}

22:00 Europe Consumer Confidence {Forecast: More negative}

Critical level (2011-05-13 Agricultural Bank of China 1288.HK analysis)

Hang Seng Index plunged below 23,000 yesterday, reaching as low as 22,985, but was able to close above 23,000, which is a minor psychological support. Nevertheless, the next major support would be at around 22670 on weekly chart.

Despite the poor investment atmosphere, I am still trying to find whether there are stocks worth buying.

Daily chart of Agricultural Bank of China ABC (1288.HK):


As a friend of mine bought this stock last week, I am trying to analyze whether he could still hold it or when he should cut loss.

The green uptrend line represents a major support to the stock price. It started from the trough in Feb 2011, and has successfully supported ABC for 3-4 times.

Currently, ABC is testing this line again. If the line still works, the stock price would bounce and could at least reach the previous peak at around 4.65.

However, if it breaks down, I discover that the large gap in late March would possibly be filled. That means the price could drop to as low as around 4.20.

Therefore, 4.50 is a critical level now. If it breaks down and the selling force is too large, ABC holders should have no time to hesitate but to sell all the shares to stop loss. If it rebounds, due to the current bad global stock markets, the stock shouldn't be held for a long time. Holders should sell during the rebound.

Stable (2011-05-12 VIX analysis)

Above is the daily chart of volatility index (.VIX). After yesterday's plunge in US stock markets due to concerns of higher interest rates, the index surged a bit.

We can see that the level of around 16 is a strong level supporting the index. The market has to be extremely boring in order to go lower than 16.

On the other hand, 18.3 would be the resistance. The index has not successfully surged beyond this for two months.

I would expect a further gain for VIX, but it seems like there is no breaking news to make it break out. So we can still expect a more-or-less stable market.

End or start? (2011-05-11 US Dollar Index analysis)

Above is the daily chart of US Dollar Index (.DXY). The index was able to pare some of its losses since Feb 2011 these few trading days.

However, DXY reaching the red downtrend resistance, the crazy surge was put to an end. We can see that US Dollar struggled to rise further, but the selling-force was just too large that a long upper shadow was formed, and it could not break out.

Good news (for USD Index) is that the price didn't just plunge as soon as it reached the line. Instead, it held quite firmly at the current level. This might be an indicator that the index was gaining more and more buying-force at this point.

A bullish flag might possibly appear if my observation (or guess) is correct. Support will be provided by the green line on the chart, which is at around 73.70.

If break out does happen, investors would be attracted to LONG US Dollar, and the stock market might slump due to out-flow of money.

Would it be the end of the surge of DXY, or is it just a start?

What's about the downside? (2011-05-09 HSI analysis)

Due to snowballing fears of US economy, investors were losing confidence on stock markets. After death of Bin Laden, people expected an increase in US Dollar; however, it seemed the effect was not as powerful as we anticipated.

Hong Kong stock market experienced a streak of lose after the 8th consecutive fall on last Friday, longest since SARS in 2003.

Bad news is that Hang Seng Index dropped below important support levels in both daily and weekly charts.

Daily chart of HSI:

The red line is a downtrend line, which changed from resistance to support in late March 2011. On last Wednesday, the index plunged below and broke the support level.

On the other hand, 10-day Simple Moving Average crossed 50-day SMA from above. It might indicate bearish, but Moving Averages are lagging indicators, this is not a very strong signal.

Trying to find out on which level the support lies, I used a fibonacci projection with previous peak and trough. HSI broke the 100% level, so the next one would be 161.8%, which is at around 22,650.

The red downtrend line acts as resistance, so we can expect a strong selling force at around 23,400.

Weekly chart of HSI:

The purple uptrend and red downtrend lines had been existing on this weekly chart for a long time. Last week, HSI broke the red downtrend line from above, and showed a bearish trend. Luckily, 50-day SMA supported the index and stopped its slump.

I drew another trend line in green. This probably provides strong support to the index next week.

Again by drawing a fibonacci projection, I tried to find a support level on weekly chart. This time I used the high and low levels when the index touched the purple uptrend line and dropped. Interestingly, the support level I found is 22670, which is almost the same with the level on daily chart.

Resistance is given by the red down-trend line, which is at around 23,300.

To conclude, there is no doubt that given the current economic and investing situation, 23300-23400 would be an extremely strong resistance to the index. For the downside, it really depends on the economic data next week such as the consumer confidence, whether al-Qaeda would do anything in revenge to US and the detailed plan to aid Greek's financial crisis.

Important Economic Data this week (2011-05-08)

9-May (Monday)

16:30 Europe Sentix Investor Confidence

10-May (Tuesday)

09:30 Australia Trade Balance {Forecast: Rise from -205M to +500M}

10:00 China Consumer Price Index {Forecast: Drop from 5.4% to 5.2%}

15:15 Switzerland Consumer Price Index {Forecast: Drop from 0.6% to 0.5%}

20:30 US Import Price Index {Forecast: Rise from 9.7% to 10.5%}

11-May (Wednesday)

09:30 Australia Employment Change {Forecast: Drop from 37.8K to 17.0K}

14:00 Germany Consumer Price Index {Forecast: Unchange}

17:30 Bank of England Inflation Report

12-May (Thursday)

20:30 US Advance Retail Sales {Forecast: Slight increase}

13-May (Friday)

14:00 Germany GDP {Forecast: Rise from 0.4% to 0.9%}

17:00 Europe GDP {Forecast: Rise from 0.3% to 0.6%}

20:30 US Consumer Price Index {Forecast: Drop from 0.5% to 0.4%}

20:30 US U. of Michigan Confidence

Where is the ground? (2011-05-06 Gold and Silver analysis)

Hang Seng Index wasn't moving a lot yesterday. Would it be able to recover its position above the up-trend line on weekly chart?

After speculators like Soros started to sell Gold and Silver, both of these items slumped these few days. Gold dropped from 1576 back to around 1500, while Silver plunged to as low as 38. We might wonder: where is the ground? Let's take a look.

Daily chart of Gold (XAU):

There were four consecutive big black candles, following the record high at 1576. The green line is a medium-term uptrend line, which can provide support to Gold.

Furthermore, I have drawn a fibonacci retracement using the low and high in 2011. The price of gold just broke 23.6% level, and was heading down to the next level.

Though 1,500 could possibly be a strong psychological support, we couldn't find technical support there.

Instead, the green uptrend line should be a strong one to stop the price from further falling below 1470. Indeed, the level of around 1470 is also 38.2% fibs level. We can expect strong buying-force here.

Daily chart of Silver (XAG):

The chart of Silver looks simpler. I have identified three possible uptrend lines, shown in red, green and purple.

Silver price broke the red short-term uptrend line two days ago, and was supported by the green line.

Level of 38 appeared to be quite a strong one; but in fact, the trend line is not as valid as the others as we can see there wasn't much resistance/support in Jan-Feb 2011. I doubt the strength of this line.

Purple one would probably be the bottom line. This should be an extremely strong one which provides support at around 33.

Good time to long? (2011-05-05 GBP/USD analysis)

Hang Seng Index dropped 1.35% yesterday, reaching as low as 23,230 and closed at 23315. On daily chart, the level of around 23,250 successfully supported HSI, giving power to it for a little bounce yesterday. However, on weekly chart, it appears that the index did break the support line. This is not a good signal, but still, there are 2 trading days left. Be aware guys.

Let's see GBP today as I found it good to trade.

Above is the daily chart of GBP/USD. The Pound retreated somehow 2 days ago, most likely because of death of Bin Laden which resulted in strengthening of USD.

Reaching the green up-trend line, GBP managed to bounce, keeping itself within the trading range (green and red lines).

MACD is touching its EMA, we would have to wait two more days to confirm whether they cross or not. If so, there would be a bearish cross indicating weaker GBP.

For the upside, the resistance will be at 1.678 given by the red up-trend line.

GBP would probably break the pennant in next few days, and as continuation is suggested by pennant, I would anticipate a continue in rise of sterling. Should be a good time to long GBP.

False Double-top? (2011-05-04 0305.HK analysis)

Above is the daily chart of Dragon Hill Wuling Automobile Holdings Ltd (0305.HK), which is a small-cap stock priced 1.09 currently.

Yesterday this stock surged 5.83% which caught my attention. I analyzed it and found somehow interesting result.

From the chart, we could see that starting from mid-March, the stock price has been rising from 0.87 to around 1.16 in early-April. Then a double top was formed.

Last week, led by the poor markets, 0305.HK dropped below trough level. We might have thought about shorting the stock at this point; however, yesterday it managed to get back above this level which showed a potential bullish signal.

The price is still been limited by the 20day Simple Moving Average. If it breaks this resistance, we could expect it to reach 1.16 without difficulty, which is around 5% rise.

Of course we are not looking for such a little gain. Therefore, we have to observe whether the buying-power is strong enough to break the double top level as well.

If so, 1.30 is expected. This level would be the next resistance.

Tracing back in the past (late October), the stock blew off from around 0.65 to 1.6, which was around 146% surge. Interestingly, the price stopped rising there and started sliding down, but I think that there was no obvious evidence on distribution stage.

Therefore, another blow-off might happen again. Let's just put this stock in our watch-list.

Topping? (2011-05-03 HSI analysis)

Another vacation has passed. Time really passes fast and it would be my last month of my 3-year Undergraduate study.

Last week was not a good week, closing with three consecutive black candlesticks. While there was a break-down on daily chart, no bearish signal was given on weekly chart. Big picture is still unclear enough to make any decision.

Daily chart of Hang Seng Index:


Obviously, after the three black candlesticks last week, the index broke the red short-term up-trend line. This isn't a good signal for the next short-period of time.

The green down-trend line still holds, expected to provide a bit support should the index fall that low, at around 23,250.

50SMA appeared to give even better support last week, forcing the candle on Friday to form a long lower shadow.

Weekly chart of HSI:


Fortunately, HSI is still within the diverging triangle. It is still expected to be traded in this range.

Last week the index closed at near the lower bound of the triangle, if the line could hold, HSI could be supported and rebounce. Bottom line would be at around 23,400.

Volume is shrinking while MACD is falling, they are signals of topping. It seems like a critical time this week.

Important Economic Data this week (2011-05-01)

3-May (Tuesday)
12:30 Reserve Bank of Australia Rate Decision {Forecast: Unchange}
17:00 Europe Producer Price Index {Forecast: Unchange}

4-May (Wednesday)
17:00 Europe Retail Sales {Forecast: Unchange}
22:00 US ISM Non-Manufacturing Composite {Forecast: Slight increase}

5-May (Thursday)
19:00 Bank of England Rate Decision {Forecast: Unchange}
19:45 European Central Bank Rate Decision {Forecast: Unchange}

6-May (Friday)
19:00 Canada Unemployment Rate {Forecast: Unchange}
20:30 US Change in Non-farm Payrolls {Forecast: Decrease}
20:30 US Unemployment Rate {Forecast: Unchange}