Leading bank (2010-10-20 HSBC analysis)

DJIA dropped by 1.48% and both S&P 500 Index and NASDAQ fell by more than 1.5%. China raised its benchmark rate. These were all bad news to the stock market in Hong Kong. So corrections probably continue after a rebounce yesterday.

Today let's look at the leading bank, HSBC (0005.HK).



As you can see, HSBC was trading in a converging range, forming the pennaut in lime. Few days ago there was a breakout, but it turned out to be a false one as it could not stand above the resistant for 3 days. After reaching the support line two days ago, the price had little rebounce yesterday along with the whole market.

A breakdown is more likely to occur given such bad market conditions. If it happens, fibs level could give us some hints about how much it would fall. The 61.8%-level looks weak, so we may expect the price to drop to 50%-level, which is at around 76.9. This is the first support of the stock.

MACD shows a downward trend which aligns with the analysis above. Be careful everyone. This correction could be a long one.