Weak pattern (2011-08-31 CCB analysis)

Above is the daily chart of China Construction Bank CCB (0939.HK).

Starting from May 2011, the price has been sliding along the red down-trend line, and could not surge beyond this line.

In late July and early August, led by the general markets, CCB just slumped and reached as low as just above 5.0.

Until now, there was a double bottom quickly formed. Though normally the two troughs have to be at least 4-week apart in order to be a real double bottom, this could be treated as a weak one.

This pattern signals a trend reversal, but as its weak one, I would treat it as a rebound pattern instead.

But the red line is another concern. If CCB jumps over the resistant, it could reach 6.24, which is suggested by both the fibonacci retracement and the double bottom pattern.

If not, the price is more likely to get back to 5.0 and forms the third bottom. Somehow such stocks are led by the whole stock markets.

From Volatility to Index (2011-08-30 VIX analysis)

Above is the daily chart of Volatility Index (.VIX). It has been giving good hints to us about how the indexes would move.

Breaking out in Early August to around 48, VIX is currently moving in a narrowing trading range, which started from 30-48 to 32-43. This is expected to keep on dropping unless the index breaks either side.

Using the extreme high in late 2008 and the low in 2011, we can get the fibonacci levels. Interestingly, the level of 32 represents 23.6% retracement level. This shows that this level would support the index.

On the other hand, I identified an Andrew Pitchfork on the chart shown in purple. VIX has just reached the lower line of the Pitchfork as well. This fork gives support to the index too.

Therefore, it is more likely that VIX is going up again, and stops at around 41-42 due to the red down-trend line resistant.

Once the index breaks out, it would go even higher than 50. As I have mentioned, this would mean something serious happening because 50 is a critical level.

So I think at this moment, when everything seems not too bad (not good as well), chance for break down would be higher. Index will consolidate if this is the case.

Not much hints (2011-08-29 HSI analysis)

Last week there wasn't much happened. Bernanke's speech did cause US stock markets rallying last Friday, but the effect should not last long. Gold surged greatly after big drop in middle of last week.

Daily chart of HSI:















Same as last week, the index was in the middle of the Pitchfork, not reaching either side.

18,900 is the previous low, and the support given by the lower line of Pitchfork is around 18,500. This zone is the support zone for the index.

Given Bernanke's outlook of economic situation, stock markets this week is more likely to rise. If so, it is possible that HSI will form a little double bottom.

To be more specific, if the index surges through 20,500, it would definitely get back to the red down-trend resistant at around 21,000 and then the upper line of Pitchfork, which is at around 22,100.

Weekly chart of HSI:















Weekly chart indeed gives the same information to us. Everything is just the same.

One more piece of information, if HSI breaks down 18,800, it would plunge up to around 15,800. This could be one of the easiest ways to make money.

So this week we'll have to see how VIX goes too. I'll pos tthat

Important Economic Data this week (2011-08-28)

30-Aug (Tuesday)
22:00 US Consumer Confidence {Forecast: Drop}

31-Aug (Wednesday)
15:55 Germany Unemployment Rate {Forecast: Unchanged}
20:30 Canada Q GDP {Forecast: Drop}

1-Sept (Thursday)
09:00 China PMI Manufacturing {Forecast: Slight rise}
13:45 Switzerland GDP
14:00 Germany GDP {Forecast: Unchanged}

2-Sept (Friday)
17:00 Euro-Zone Producer Price Index {Forecast: Increase}
20:30 US Unemployment Rate {Forecast: Unchanged}

Just wait (2011-08-26 BaWang Group analysis)

Above is the daily chart of BaWang Group (1338.HK). I guess most Chinese are quite familiar with it because of its interesting hair shampoo advertisement by Jackie Chan.

Its IPO was out in 2009 and opened at 2.38. The life-time high is 6.60 in late 2009 and is currently 0.98, what a big difference!

As we can see, starting from 2010, the stock price was moving under bearish trend along the orange Pitchfork. It slid from over 6.0 to 2.0 and broke the IPO price.

Then, there was a bearish flag (shown in green). This flag was a continuation pattern signaling further plunges. Not surprisingly, it kept on moving downwards after 3-month of flag formation.

Starting from April 2011, BaWang moved along the purple Pitchfork. Reaching below 1.0, it sounds pretty attractive to investors/speculators.

The only signal we are waiting for is the break out of the purple Pitchfork or the red down-trend line, which are almost the same. If it breaks out, it is quite likely that it would get back to the IPO price at around 2.38, or even higher.

Yesterday, its volume surged greatly. This shows that there might be some rich investors having optimistic views on it.

So keep this stock under your watch-list and wait for any possible signals.

Up up up (2011-08-25 EURUSD analysis)

Sorry today I have no time to write as I am in a hurry to work. But I think the above daily chart of Euro is quite easy to understand.

Basically, there are a few things:
1) EUR broke out two weeks ago, and is more likely to move upwards
2) Pitchfork looks well too, and Euro is currently at its lower line
3) MACD is at level around zero, there is no extra force stopping the currency to rise

Good luck :)

Between stable and unstable (2011-08-24 VIX analysis)

Above is the daily chart of Volatility Index (.VIX). The previous sudden plunges in global stock markets due to the "concerns" led the index to previous high in mid 2010 at around 48.

Checking the historical data, we could easily find that this index only surged over 50 during financial crisis. Other than that, 50 is a critical level that always resists VIX.

Though the index was resisted at around 50 and fell, it was climbing again after reaching the upper line of Pitchfork. This is another evidence that the fork works quite well on charts, which we had proven on Hang Seng Index weekly chart.

The pitchfork is giving the next support at around 33 (sorry for the typo on the chart). Ultimate support by pitchfork is at around 30, which is gradually rising.

For the upside, of course it would be 50. Breaking out of this level would mean that there are some breaking news which greatly influences the stock markets.

At this moment, I guess if this really happens, it is more likely that the stock markets would slump hardly as bad news are just everywhere.

But currently, my view is that the index would fall into the fork again and rise slowly, instead of breaking the critical level all of a sudden. Stock markets would not be too stable (with maybe 300-point movement for HSI), and would not be too unstable either (at least there won't be over 600-point movement).

Extreme market (2011-08-23 Gold analysis)

While the stock markets are kind of fluctuating, with HSI having a big V-shape yesterday, Gold just keeps on surging.

Gold price was still 1,600 in mid July, but currently it reaches 1,900, which means around 19% rise in just a month. This is quite rare in commodity markets.

Trying to guess its next resistant, I input quite a lot of indicators. However, with such a sudden jump, trend-lines are not too helpful.

Moreover, we can see that MACD and RSI are soaring to extreme levels. They become quite meaningless when dealing with such trends.

Next, I added a fibonacci projection using the orange wedge, and surprisingly something popped up. At all important levels (100%, 161.8%, 261.8%), there seemed to be some resisting forces.

So this projection might help us figure out the next resistant level: around 1,960, the 423.6% level. It looks like reaching 2,000 might be quite difficult this time.

The price is around 1,900 currently, and there are only around 60 points left. I don't suggest investors to LONG gold at this moment until it appears to break out even the 423.6% level.

Bad news and trading range (2011-08-22 HSI analysis)

Last week China Vice Premier Li Keqiang visited Hong Kong and gave us 36 big gifts including HK as offshore Renminbi Center. However, thanks to, again, the "concerns" of Europe debt problems and US poor economic data, the gifts did no help in boosting Hong Kong stock markets. Hang Seng Index plunged over 900 points since Wednesday and closed at 19399 on Friday.

Dow Jones Industrial Averages slumped by another 1.57% last Friday. Common Euro bond, which are generally treated as one of the very few methods to rescue European countries, was supported by neither EU president Van Rompuy nor strong countries like Germany. The debt problems in Europe were yet to be solved, or at least eased.

Among all these news, perhaps US's QE3.0 would be the only piece of good news to the stock markets. Though there are no official announcements about it, many experts are expecting it. Given the very slight influence by QE1.0 and QE2.0, the third one is going to play the role as delaying everything. The basic illness is not cured, QE is just a way to let people forget pain.

Anyway, let's see stuff through technical analysis.

Daily chart of Hang Seng Index (HSI):














Last week, I expected that the index would have been resisted at 20,900; in fact, HSI could not even surge above 20,500.

Dropping below the orange line, Hang Seng Index will face resistance at 19,700, but this would be a relatively weak one.

Strong levels are found at 18,000 and 20,900 (again). Though the range is pretty large, if the index breaks either one, the trend could be well confirmed.

MACD and its EMA touches each other again. Perhaps a zig-saw shape will be formed and that the cross last week was a false bullish cross.

Weekly chart of HSI:














It sounds unrealistic saying that the trading range is 18,000-20,900 on daily chart, isn't it? Weekly chart does give a better picture on what will happen next.

The red down-trend and green up-trend lines are exactly the same as that on daily chart, which are giving quite meaningless information.

The more critical indicator is again the Andrew's Pitchfork. This fork has done extremely well in helping us predict the movement of HSI, including the top at 22,800 and the low at 18,800 in past few weeks.

Therefore, by taking reference on the middle and lower line, we can get the narrowed trading range of 18,750-20,600.

In fact, 18,800 is also the 32.8%-fibonacci retracement level using the high in late 2007 and the low in late 2008. Together with the pitchfork, this level is definitely a very strong one and that the index could hardly break it (of course unless there is extremely breaking news).

For the upside, middle line would be resisting the index. This gives better explanation why HSI could not go beyond 20,500 last week. So this week we have to be aware of 20,600.

Let me talk more about the bigger picture which should not be showing up this week. The green line is the last support so far, if the index breaks down, next support will be found at 15,700. So if we confirm the breakdown at 18,000, we can short futures or long put for that 2,000 something points.

Good luck.

Important Economic Data this week (2011-08-21)

23-Aug (Tuesday)
17:00 Germany ZEW Survey (Economic Sentiment) {Forecast: More negative}
22:00 Euro-Zone Consumer Confidence {Forecast: Slight decrease}
22:00 US New Home Sales {Forecast: Slight Increase}

24-Aug (Wednesday)
20:30 US Druable Goods Orders {Forecast: Big increase}

26-Aug (Friday)
16:30 UK GDP (YoY) {Forecast: Unchanged}
20:30 US GDP {Forecast: Slight drop}
21:55 US U. of Michigan Confidence {Forecast: Slight increase}

Trading range (2011-08-18 GBP/USD analysis)

As expected, the world's stock markets are running kind of flat these few days. Traders do need to take some rest.

4-Hour chart of Great British Pound (GBP/USD):















Sterling is currently moving along a upwards trend, with last five consecutive white candlestick. In fact, yesterday it made a critical move: breaking out of the resistance in late July.

Tracing back to mid-July, we can find that the pounds broke out the dotted red down-trend line. The trend was supposed to have changed. However, in late-July, the area 1.643-1.647 was a very strong resistance to the price. GBP could not break out and could only form a box shape.

In early August, price plunged but recovered quickly, and formed 5 consecutive white candlesticks these few days.

Reaching the resistance at 1.659, GBP fell again. We can expect a very strong support at around 1.647 provided by both the zone and the green short-term up-trend line.

Therefore, the next trading range should be at from 1.647-1.659. If the pounds break 1.659, then it would reach the previous high at 1.6737.

On the contrary, breaking down 1.647 also means a breakdown of the short-term up-trend line and hence a short trend reversal. 1.62 is a must if this happens.

Lower risk lower return (2011-08-17 PetroChina analysis)

Above is the daily chart of PetroChina Co. Ltd. (0857.HK). Apparently, the group focuses on production and sale of crude oil and natural gas, as well as refining and transportation of crude oil and natural gas products. (from http://aastocks.com)

Following the global market plunges, PetroChina fell from over 12.0 to around 9.0, which was over 25% slump.

While stock markets are becoming stable, this stock should be climbing again. Yesterday, it successfully got back above the 10-day Simple Moving Average.

MACD intersects with its EMA, with MACD crossing from below. Volume did not rocket but did not shrink either. It should be a good sign for a short bullish trend.

There will be a weak resistant at around 10.0, I think the price could break it without much difficulty. Then PetroChina would face strong block at around 10.75.

Ultimate resistant is at around 11.40 given by the highest dotted red line. The level is dropping, and I think there would be selling-force as well at some critical fibonacci level such as 61.8% at 11.06.

This stock could probably bring you some quick money. Return is not expected to be too much, only around 10-17%. But such large-cap stocks are defensive. Lower risk comes with lower return.

Good luck.

What does this pennant mean? (2011-08-16 USD/JPY analysis)

Hang Seng Index rebounded more than 3% yesterday, surging above 20,200. I believe in coming few trading days the volatility would be getting lower and lower. VIX dropped 12% yesterday, which showed that US markets are calming down as well.

Volatility for stock markets might be dropping, but it seems like that for Forex is going to rise. Let's see Japanese Yen.

4-Hour chart of Japanese Yen (USD/JPY):



As you might remember, during the uncertain and plunging equity markets in July and August respectively, Japanese Yen and Swiss Franc were the two currencies that stood out of the crowd and strengthened quite a lot.

As an attempt to curb this situation, both government made intervention to stop the trend. For Japanese Yen, this can be seen on the two large white candlestick in early August on the above chart.

Trend for Franc has reversed, and the currency was weakening since then; however, it looks like the trend continues for JPY. Speculators have chosen to keep on pushing the Yen.

For the last few days, a pennant was formed after an obvious bearish trend. If USD/JPY breaks down, this is a bearish continuation pattern and that the price could slump to 72-73.

If the price breaks out, it shows that JPY has topped and its trend is going to change. So its time to long USD/JPY.

How about this week? (2011-08-15 HSI analysis)

Last week was another horrible week. While we might think Hang Seng Index could rebound at 20,000, it just lost another 1,200 points on Monday. Then the index moved up and down fluctuating in the remaining of the week, confusing us about what would happen next.

So, after two-day of calm-down period, let's find out something from the charts.

Daily chart of HSI:


After falling to 18,868 on Monday, which was the 2-year low, there was a little support to the index. Obviously, there was not much buying force which would otherwise have brought HSI back above the red down-trend line.

Indeed, the red solid line acted well as a resistant on Friday and that HSI could hardly surge higher.

However, with the increasing volume last week, I think that this red line is getting weaker and HSI would break it this week.

The next resistant is shown by the dotted red line (the lower one). The level is at around 20,900 shown on daily chart. (Later I will show that there is a little discrepancy on weekly chart).

For the downside, we will check it out on weekly chart.

Weekly chart of HSI:


Same as that drawn last week, the purple pitchfork did give us hints about how much the index would fall. The support by the fork at around 19000 was undeniably a predictable one.

The week, this support level drops to around 18,600. So for downside, we can expect a strong buying force at 18,600, which is around 1,000 points from now.

The red solid line is the same one, there is a weak short-term resistant at around 19,750.

For the next red line, I have moved it a little bit so it was not the exactly same one as that on daily chart. As a result, we can see that the resistance level shown on weekly chart is 21,100 instead of 20,900.

Although this is not a very big difference, we should treat it as a resistant zone at this area rather than just looking at one of the two levels.

So far, the economic data coming out this week seems to be quite positive. There shouldn't be many excuses for global stock markets to plunge. VIX is getting lower and the markets will be less volatile. I would be expecting a bullish market this week. So watch out the levels 19,750, 20,900-21,100 (though I don't think it could reach 21,000 given the falling volatility).

Important Economic Data this week (2011-08-14)

15-Aug (Monday)

07:50 Japan GDP (QoQ) {Forecast: Less negative}



16-Aug (Tuesday)

14:00 Germany GDP (QoQ) {Forecast: Drop}

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

17:00 Euro-Zone GDP



17-Aug (Wednesday)

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

16:30 UK ILO Unemployment Rate {Forecast: Unchanged}



18-Aug (Thursday)

16:30 UK Retail Sales {Forecast: Decrease}

20:30 US Consumer Price Index (YoY) {Forecast: Decrease}

22:00 US Existing Home Sales {Forecast: Increase}



19-Aug (Friday)

19:00 Canada Consumer Price Index (YoY) {Forecast: Drop}

Safe heaven (2011-08-11 CHF analysis)

Above is the 4-hour chart of Swiss Franc (CHF). Starting from May 2010 when USDCHF was at 1.17, Franc has been strengthening.

The situation worsened in August 2011 as CHF rose even faster following the debt concerns in Europe. Investors were speculating on Franc.

We can see that USDCHF was falling along the purple Pitchfork for over a month. Yesterday, it finally broke the fork and USDCHF plunged lower.

On the 4-hour chart, Franc formed a small flag after great surges. The flag was probably a bearish flag on this USDCHF chart signaling another bearish wave coming.

I expect that there is still room for CHF to rise as the debt concerns in Europe and US are still not solved. Speculators would be seeking something "safe" such as Japanese Yen, Gold, Swiss Franc and so on. These would be keep on rising until the concerns are more or less eased.

Cement again (2011-08-10 TCC International Holdings Ltd.)

Finally Hang Seng Index dropped below 19,000 but later remained above this level. It seems like this level is pretty strong which the index could hardly break at this moment, and its time for some rebound.

Let's find some good stocks for short-term investment.



Above is the daily chart of TCC International Holdings Ltd. (1136.HK). The principal activities of the Group consist of the import and distribution of cement in Hong Kong, the manufacture and distribution of cement, clinker and slag powder in other areas of the People’s Republic of China. (from: http://aastocks.com)

To me, cement companies are currently worth investing ones. There are lots of constructions in both Hong Kong and PRC that require lots of cement.

Also, when the stock markets are fluctuating like that and possibilities of default in US and some EU countries, China has to devote more effort into building infrastructures in order to boost its competitiveness against US or Europe. Cement becomes one of the most critical materials.

Technically, the green line nicely supported the stock price, which plunged following the over-1000-point slump in Hang Seng Index.

Moreover, a big white candlestick was formed yesterday. This is a possibly trend reversal pattern which signals an end of the bearish movement.

4.80 is undoubtedly the first resistance, which resisted the stock price from going any higher yesterday. If TCC breaks above it, I would expect it reaching the previous high at 5.50.

In longer-term, this stock is a good stock. Current ratio and Quick ratio both turned into higher than 1.0 in 2010/12. Compared with lower than 1.0 in 2009, we can see that the company is trying hard to lower their liabilities and increase assets. Though long-term debt/equity and total debt/equity both rose, the amount is not very non-reasonable and if the company could make good use of these debts, they could make a good profit.

Take a rest now? (2011-08-09 VIX analysis)

Another crazy plunge in US markets yesterday night (over -5%), and HK market would probably follow again today dropping over 1,000 points. I expect the index reaching 19,000 support level which I mentioned yesterday.



Daily chart of Volatility Index (VIX):





Finally I had to zoom in the chart to over 3 years. With the sudden movements these few trading days, the volatility index jumped and reached the 2-year high at 48.



I believe its time for the stock markets to take some rest. Nevertheless, we can see that the only period when VIX surged over 50 was during Financial Crisis in 2008.



Although there are many bad news coming and coming now, there is no single trigger that could result in it; unless one of the few countries goes default.



Therefore, consolidation/slight rebound should happen for S&P500 tonight, perhaps after the big fall in HSI today.



And then when its time for another crisis, the VIX would be jumping high again.

Bearish view (2011-08-08 HSI analysis)

What a long time since we last saw Hang Seng Index plunge over 1,000 points. The strange thing for last Friday's incident was... there wasn't much bad news causing so. The raise in debt ceiling in US was even passed, and the stock markets just slumped. Europe and US markets dropped over 4% on Thursday and Asia markets followed on Friday.

S&P then downgraded US to AA+, and different parties carried various views on it. Buffet said US should get quadruple A but it was quite obvious that he was trying to calm investors down in order to maintain the stability of global stock markets.

OK let's get back to Hang Seng Index.

Daily chart of HSI:


Obviously, the candlestick on last Friday just broke all the short-term and medium-term support levels. There was a huge gap in between.

The index opened at 20939 and fell to as low as 20643. Finally, it rebounded and closed at 20946. An extremely long lower shadow was formed. The body of the candle was small too cause the open and close was almost the same. Therefore, we can treat it as a Doji.

With such a position and the previous black candlestick, this could possibly be a Morning star, signaling an end to the bearish trend and a start of bullish trend.

But this would depend on whether the candlestick today would be a white one or not. If so, it is a trend reversal pattern; otherwise, the bearish trend should continue.

Nevertheless, resistant level is at around 21,200, but this is not a very strong one. If HSI is going to fill the gap, it might stop at this level for a short while.

Weekly chart of HSI:


It looks clearer on weekly chart. I have been drawing the pitchfork for the past few weeks HSI analysis thread, and there is no doubt that the pitchfork does matter.

After HSI touched the upper line of fork, it slumped last week. Amazingly, it was then supported by the middle line of the fork.

Therefore, there should be some rebound at this point. Other than 21,200 shown on daily chart, the next one would be at 21,700, which is the 23.6% fibonacci level. This level has been doing well on supporting the index before, and now it would turn to resistant.

On the other hand, if HSI keeps on falling and breaking the middle line of pitchfork, it could reach 19,000. Another financial crisis would follow.

To be honest, I am not having an optimistic view. All the news we have now are bad ones. Countries in Europe and US itself are having problems repaying debts. For US, they are just delaying the time of default, no actions are done in regards to the decreasing ability to get revenue. Ultimately, they may need bail-out and its just a cycle. Once the bubble bursts, more than one countries would have to go default and markets will surely plunge hard. I'm not sure when this day would come, but to me, it seems like it will happen soon.

Important Economic Data this week (2011-08-07)

8-Aug (Monday)
13:45 Switzerland Unemployment Rate {Forecast: Unchanged}

9-Aug (Tuesday)
10:00 China Consumer Price Index

10-Aug (Wednesday)
02:15 US FOMC rate Decision {Forecast: Unchanged}
07:50 Bank of Japan Meeting Minutes
14:00 Germany CPI {Forecast: Unchanged}
17:30 UK Inflation Report

11-Aug (Thursday)
09:30 Australia Unemployment Rate

12-Aug (Friday)
20:30 US Advance Retail Sales {Forecast: Increase}
21:55 US U. of Michigan Confidence

source: http://www.dailyfx.com

More on USD (2011-08-05 DXY analysis)

Last week's Monday (25-July) I wrote that HSI would experience a big drop and reach 21,000 last week. It seems like I had made that conclusion too early and given no time for the index to move as so. And today HSI is going to reach 21,000 following the 4% plunge in US markets and more than 3% slump in European markets and Japan markets currently.

Looking at the weekly chart, we can find a support at around 20,900 (fibonacci). If the index breaks this level, which means it has plunged through the middle line of fork as well, next strong support will be at around 19,500.



Above is the daily chart of US Dollar Index (DXY). I anticipated that the index would drop further because of the bearish flag.

However, Japanese and Swiss both acted against their strengthening currencies, which harmed their export trade. Therefore, we can see that the Japanese Yen and Switzerland Franc both weakened yesterday.

Indeed, most of the major currencies weakened against US Dollar, which may be one of the reasons behind the 4% slump in stock markets.

DXY was back into the large flag, and broke out the bearish flag I mentioned on Tuesday. 76 will be the next resistant level.

MACD and EMA crossed and gave a bullish signal. RSI is at quite a high level, so the index would probably consolidate for one or two days before starting another large rise.

General trend is still bearish, as the index is still under the red down-trend line. If it breaks out (76), then we can conclude that the whole trend has changed. Bullish Dollar Index would basically mean bearish stock markets too.

Good luck.

Important cement (2011-08-04 China International Material Co. Ltd. analysis)

Following the possibly of downgrade on US by Moody, the global stock markets plunged hardly. Hang Seng Index was down almost 2% yesterday, reaching as low as 21882, which is the support level I mentioned on Monday's thread. There should be a little rebound, but the general trend is still bearish.

Among some big companies, I was trying to find out any worth-buying stocks. Given such poor investing environment, most of the large-capital stocks are more likely to follow the market to slump.



Above is the daily chart of China National Materials Co. Ltd. (1893.HK). The Group is principally engaged in provision of cement equipment and engineering services, production and sales of cement and other high-tech materials. (source: http://aastocks.com)

The stock price has been under the bearish trend since April, and was moving to lower levels slowly.

Due to the sudden drop of global markets, the stock price followed and a long black candle was resulted.

The red line represents the resistant and green line is the support. Purple lines are the pitchfork lines.

As we can see, the price just reached the middle line of the fork. Therefore, we can expect a little rebound here.

If the stock price breaks down, the next support will be at around 4.05, which is an extremely large drop representing around 20% slump. Nevertheless, given these few days' situation, such plunges are not surprising.

The upside target is at around 5.50, then the price would be more likely to stop rising and turn to downward in short-term.

However, in long term, this company quite worth investing. Cement is a crucial materials used in construction sites, and usually in last three to four months of a year, there will be lots of construction sites in China hoping to use up the funding by Government; therefore, this company would probably get good profits later.

If it really reaches 4.05, then we can consider buying this as a longer-term investment. But what we have to keep aware of now is that when the price drops below 5, we can sell and wait until 4.05 and buy again.

Bearish flagsss (2011-08-02 DXY analysis)

The House just approved raising US debt limit by at least $2.1 trillion. Default date therefore was delayed, and corporate investors made good use of this news to narrow the plunge of US markets yesterday.

However, I do not think this has a long-lasting effect. In fact, after HSI reached 22,800 yesterday and showed a false breakout, we can expect the index to drop in remaining of this week. Around 22,150 is the next support.

So today let's see how the increased debt limit could possibly affect the US Dollar.



Above is the daily chart of US Dollar Index (DXY). The index broke down the red flag two weeks before, and the overall trend has turned to even more bearish.

Indeed, the red flag could be treated as a bearish flag when we look at the big picture. At first, US Dollar slid along the orange down-trend channel. Then a bearish flag appeared and told us that the trend would continue.

After looking at the big picture, we can try to investigate some smaller waves. The purple flag is possibly another bearish flag, following the bearish movement in July 2011.

The index beautifully moved along this purple channel. If it breaks down, then another big downward wave should show up. Therefore, Euros, Pounds, Yen so on and so forth are anticipated to strengthen.

On other hand, if DXY breaks out instead, the lower red line will be the resistant. The level is currently at around 15, but it will be increasing.

Personally I carry a more bearish view on DXY. While USD is depreciating, HKD is following as well. We will be having a hard time to convert the currencies for traveling or trips...

Bearish Trend (2011-08-01 HSI analysis)

Last week I expected that the Hang Seng Index plunged due to poor economic data; however, the data seemed to be surprisingly good (except US GDP whose effect on HSI had faded out after the weekend).

0621.HK which I wrote on Wednesday slumped over 20% on Friday and NZD unexpectedly went upwards after my thread about it (which I anticipated a drop) on Friday. Seems like my analysis is all wrong. Too bad...

Anyway, let's learn from failure. And check out charts of HSI.

Daily chart of HSI:


The red and green solid lines are what were drawn on last week's chart as well. We can see that the index broke the green solid line, which is the short-term down-trend line, last week.

After breaking this, HSI faced another strong resistant, which was the red down-trend line. Therefore, it seemed to be unable to go any higher, and started to consolidate.

This week, my view is non-bullish again. Red line will be the resistant (which is at around 22,500-22,650).

For the downside, the green line gives support at around 22,200, which gradually becomes as low as 22,050 five days later.

Weekly chart of HSI:


Seeing the picture, we can recognize the bearish trend of Hang Seng Index. The pitchfork is the main indicator for such trend.

Last week the index reached the upper line of the pitchfork, and was resisted and then retreated.

This week it should be falling. The 10-day SMA gives some support to the index. If HSI breaks the SMA, it is more likely to drop quite a lot.

23.6% fibonacci level is the first support (on the big picture). The index is expected to rebound at around 21,900.

Strong support will be found at the middle line of pitchfork. But the index is less likely to reach this level this week.

To conclude, this week we have to be extremely aware of any rebound at 22,200. If it breaks the green line on daily chart, then the index will drop to 21,900.