End of unclear Market movements? (2010-03-26 HSI analysis)

In response to the many sudden news announced (Portugal bonds downgraded, brighter directions for Greek aid) and the fluctuating currency markets, equity markets seemed not to be able to react accordingly. The future movement is really blur, and investors are choosing not to arbitrarily choose one side. Volume dropped these days, though the index was not that flat.

However, we have to be aware of a coming big change. According to the graph below, HSI is forming a pennant.



After HSI touched the 50-day moving average yesterday, it rallied today and stopped at 10-day moving average. We could see that basic form of pennant is not far from completion, and we would predict a large movement for HSI. Just like what I suggest for gold, long strangle (Long Call and Long Short) could be a good strategy for you to gain something even if you are not sure about the future movements. This movement would be clearer once the index breaks through the pennant, and it would be the best time to long/short equities.