Two good news for the index (2010-12-20 HSI analysis)

There were two good news for Hang Seng Index last week:
1. On daily chart, the index managed to stay above the neckline. The situation wasn't that bad;
2. On weekly chart, HSI did not break the up-trend line, which was a support to the index.

Daily chart of HSI:


Basically, the head and two shoulders have formed. The next concern is whether HSI will drop below the neckline. If so, according to the pattern estimation, it will drop till around 20,500, which is around 8% plunge.

Good news is that last week the index once broke the neckline from above, but finally it managed to regain and closed above the neckline, at around 22700. The formation of head-and-shoulder pattern has not yet completed. At least we don't have to be afraid of the plunge of 8%.

Weekly chart of HSI:


Same as that last week, the green line is the up-trend support line. This provides great power to help maintain the index at current level and prevent it from falling below. It somehow protects HSI from forming the head-and-shoulder pattern.

Though HSI experienced slumps last week, the lovely green line helps set the rebounce of the index and finally the index closed above it. However, MACD and EMA are not looking too good. Volume retreated as well due to the uncertainties on Europe financial status.

If this line breaks, it also implies the successful formation of head-and-shoulder on daily chart. Then it is definitely a bad sign...