Head-and-Shoulder (2010-12-06 HSI analysis)

As usual, let's have a bit update on Hang Seng Index and see how it would go this week.

Daily chart of HSI:


Though I had made wrong predictions last week, I found that the index is forming a bad pattern: Head and Shoulder.

After the two peaks before, with the former peak at lower level, the index currently reached the level of the first peak. Apparently, it was resisted and could not break that level last week. The two black candles could definitely show it.

22,500 would be a critical support level as it is the "neck line" of the pattern. If the index breaks it, the pattern is formed and we can expect a plunge in the index.

Good news is MACD and EMA just had a bullish cross and would probably give some confidence to investors. If HSI is not moving downwards, the next resistance level will be at around 23750, which is the level of the second-previous peak.

However, weekly chart suggests bearish.

Weekly chart of HSI:


The green line is the support up-trend line. Interestingly, the support level now is around 22,500, which is exactly the support level of the head-and-shoulder pattern in daily chart. Breaking this level would mean so bad in both charts.

MACD and EMA in weekly chart had a bearish cross. It might somehow signal a long-term bearish, and probably have a bit consolidation in short-term suggested by daily chart. Therefore, next week is still an unknown week. There will not be many economic data which can greatly affect the market, so the flucatuation should be smaller.

Good luck.