Bearish Trend (2011-08-01 HSI analysis)

Last week I expected that the Hang Seng Index plunged due to poor economic data; however, the data seemed to be surprisingly good (except US GDP whose effect on HSI had faded out after the weekend).

0621.HK which I wrote on Wednesday slumped over 20% on Friday and NZD unexpectedly went upwards after my thread about it (which I anticipated a drop) on Friday. Seems like my analysis is all wrong. Too bad...

Anyway, let's learn from failure. And check out charts of HSI.

Daily chart of HSI:


The red and green solid lines are what were drawn on last week's chart as well. We can see that the index broke the green solid line, which is the short-term down-trend line, last week.

After breaking this, HSI faced another strong resistant, which was the red down-trend line. Therefore, it seemed to be unable to go any higher, and started to consolidate.

This week, my view is non-bullish again. Red line will be the resistant (which is at around 22,500-22,650).

For the downside, the green line gives support at around 22,200, which gradually becomes as low as 22,050 five days later.

Weekly chart of HSI:


Seeing the picture, we can recognize the bearish trend of Hang Seng Index. The pitchfork is the main indicator for such trend.

Last week the index reached the upper line of the pitchfork, and was resisted and then retreated.

This week it should be falling. The 10-day SMA gives some support to the index. If HSI breaks the SMA, it is more likely to drop quite a lot.

23.6% fibonacci level is the first support (on the big picture). The index is expected to rebound at around 21,900.

Strong support will be found at the middle line of pitchfork. But the index is less likely to reach this level this week.

To conclude, this week we have to be extremely aware of any rebound at 22,200. If it breaks the green line on daily chart, then the index will drop to 21,900.