Start dropping? (2011-07-11 HSI analysis)

Last week's stock market was moving side-way within a certain trading range. China raised its interest rate and bank reserve rate again, leading to slump of banks from Mainland China. But the globe market in general was quite stable, so Hong Kong did not plunge hardly.

In this week, it looks like the index will turn its head downwards again. Let's see the charts.

Daily chart of HSI:


The longer red line is longer term trend line that has been resisting the index. HSI reached this line last week and was not able to break out.

As we can see, there is another shorter term trend line above. Therefore, even if HSI breaks the first red trend line, there will be another resistance waiting it. I am not optimistic on breaking.

Instead, I think it is time for drop. The consolidation last week somehow suggests topping of the index.

Huge volume on Wednesday was due to Temasek Holdings selling CCB and BOC, which further led to investors selling shares of banks from Mainland China.

Therefore, resistance is at 22800-23000. Strong support is found at below 21600.

Weekly chart of HSI:


Basically, weekly chart didn't tell more information than daily chart did. I have further drawn a pitchfork which confirms that there will be a strong resistance at around 23000.

MACD is turning its direction, suggesting that the bullish force has come to an end and hence the index lost its momentum to further surge.

The index is not expected to break out. It is more likely to fall again this coming week.