Strong resistances (2011-06-27 HSI analysis)

There wasn't much serious/important happened last week. The globe markets were still led by the Greek debt problem. HSI first plunged and then bounced a bit.

For forex, the pound was dropping severely due to BOE's announcement of keeping the interest rate low. US Dollar generally gained due to the end of QE2.

So how's this week.

Edited at 10:20am: Charts were drawn and this blog was written this morning before the market opened, but I just found that I had made a mistake posting it out. HSI was down to almost 21900 and then gained a bit, going back above 22000 now. The overall big picture described below is still the same.

Daily chart of Hang Seng Index:


HSI was well supported last week by the green down-trend line, we could see a nice bounce after it reached the support.

Orange line is the very short-term down-trend line which has relatively weaker strength, but from it we can know the index has turned into bullish trend in short-term. So the crazy drop should have come to an end.

The two red lines (solid and dotted) are resistances, but they are still far away so we could ignore them at the moment. We just know to keep in mind that 22,800 would be strong resistance level for the index.

I have applied a Pitchfork as well. The lower line has been doing well on keeping the pace of plunges of HSI. Now, after the index bounced, it reached the middle line of the fork. We could expect a little resistance here, but it is relatively weak as well.

Next support will be given by the green line which is at around 21,600, and resistance should be at the upper line of Pitchfork (around 22,300).

Weekly chart of HSI:


On weekly chart, the green and red solid lines are the same as those on daily chart. We can see there is a resistance area ranged from 22400 to 22800, and the index would face a strong selling force while reaching this area.

I have drawn another Pitchfork on weekly chart. This time the upper line well resisted the index from surging beyond. The index reached the middle line two weeks ago, and bounced last week. The upper line will be resistance again.

Together with the red down-trend line, there are actually three strong resistances up there. I think in short-term the index can go up to around 22800, but it would slump again as the selling force there is really strong. It is hard to break out given the current poor investment atmos