Time to short (2011-03-21 HSI analysis)

It has been over a week since the Japanese Earthquake. The recent concern was whether there would be nuclear explosion or whether the radiation would affect other parts of the world, like Hong Kong. However, it seems like the situation is now under control. Though it is found that water in Tokyo, milk and some vegetables contain radiation substances, I would not expect a huge effect on the stock markets anymore.

Any possible big impacts on the markets would be like a real explosion (which we don't want to see it happen), countries' intervention on Japanese Yen (which has happened actually). So tragedy in Japan would start fading out in the stock markets.

Next would be situations in Libya. It depends on how other countries are trying to stop Qaddafi. US, UK and France have already fired missiles to the country, but the leader appeared to be unaffected and would not stop the war. Oil prices would definitely rally further if the situation is not curbed, and gold would probably follow. Panics continue in stock markets and it is hard for investors to be bull together. In short future, global stock markets could hardly reach higher.

These are the fundamentals. Let's see how HSI would go on technical analysis.

Daily chart:


Hang Seng Index broke the short-term support which did successfully support the index a few times. If the index could not make its way back above this blue line today, we could treat this as breakdown.

Unfortunately, there seems to be no more strong support until around 20,800. Though there is a previous high at around 21,600 that could possible make the index rebound, it are not that strong at all.

MACD is heading downwards, which shows a bearish trend. A bit consolidation may happen for MACD to retreat a bit.

Weekly chart:


Weekly chart even gives a better picture of HSI. 5 weeks ago the index broke the long-term red up-trend support line. Up till now, it still doesn't manage to surge above the line. This breakdown is confirmed. Bearish trend is expected.

I tried to find a support level for HSI. The green line is the only strong one that I could identify. Therefore, it seems like 21,000 is unevitable.

Therefore, it's time to short.