As usual, the two red lines, one dotted and one solid, represent short-term resistant to the index.
The red solid line would resists the index at around 20,800, stopping HSI to surge any further. As we can see, the 50-day Simple Moving Average also acts as resistant.
This week I added one more for the downside support in green.
Last week, just after HSI having touched the green support, it rebounded and stopped at the middle of red and green lines.
It was due to the resistant force given by the 10-day Simple Moving Average. The index tried to break out but failed, and closed below 20-day SMA.
This week it seems to be more bearish trending. Hang Seng Index would probably retest the green support again at around 19,400.
What would happen if the index breaks below 19,400? Let's see the weekly chart.
Weekly chart of Hang Seng Index (HSI):
Its easier to check the support on weekly chart. The lower green line and the red line are the same as those on daily chart. And I have added one more parallel green line on the top.
This pattern looks familiar right? Yeah past 5 weeks HSI formed a flag while in a bearish trend. This shows a continuation of the bearish trend and would lead the index to very low level.
While we might confirm that the index would further plunge, we have to be careful of any potential rebound. Touching the lower green line at 19,450 is one of the reasons.
However, if this flag breaks (i.e. break down of 19,450), next support will be at 38.2% retracement at 18,800 and the Pitchfork at around 18,300. These two are major supports.
Then as I have said before, if these two break as well, it would mean a further 2,600 points slump. Again this would indicate an extremely serious things happening.
This week I expect the index to drop to 19,450 and rebound again. As there will be no extremely critical economic data to be announced, unless there is sudden breaking news, we could expect a stop from plunging below at 19,450.
Good luck.
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