What does the largest component tell? (2011-04-20 HSBC analysis)

Hang Seng Index experienced a great slump yesterday, falling to 23,520 which is below the level suggested in weekly chart. Nevertheless, such break down could possibly be a false breakdown as there are still two trading days this week. We still have to see what happens next.

Why not check the benchmark stock in HSI then? Let's see the chart below for HSBC (0005.HK).



As the largest component in HSI, HSBC definitely contributed a lot to the tumble in the Hong Kong index in past two days. It even broke down its short-term uptrend line which is shown in red.

Other than the trend line, I have put a fibonacci retracement on the chart. The levels look influential, dont' they?

Firstly, HSBC consolidated a bit after the rise at the 23.6% level. Then the stock price could not make it above the 50% level, and topped at around 85.

So now it reaches the 23.6% again. I expect that this level would have a strong support to the stock price, and there would be a rebounce here.

For upside limit, 38.2% level looks weak, so the red uptrend line would be the one who could stop HSBC. The level is at around 84.

Once HSBC breaks down, I guess the next support will be as low as 78.

Good luck.