Last week world's stock markets fluctuated quite greatly. At first, debt problem in Greek seemed to be unsolvable. Global stock markets just plunged hardly. Then, suddenly all the issues seemed to be eased due to consensus in European Union. Stock markets surged again. News-driven traders did really have to pay a lot of attention!
On Friday, EU ruled out the proposal by US suggesting EU to expand its rescue fund. But I think it should be kind of disgusted and have not much effect on today's market. So let's see how this week HSI is going.
Daily chart of Hang Seng Index (.HSI):
After the strong rebound on last Friday, Hang Seng Index was able to pare its losses on the days before and remain above the green up-trend support.
That three candlesticks showed a false breakdown, which meant that the index could not break below the flag shape continuation pattern.
Now HSI is still within the flag, and the next resistant is given by the red down-trend line at around 20,000.
Then the next resistant is provided by the upper line of the flag pattern, at around 21,000. These two levels are something we have to keep in mind.
As for downside, the lower line of flag-shape pattern is sloping upwards. The support level will keep on rising and the support is at slight higher than 19,500 by the end of this week.
This week I have no specific view on the index based on daily chart. It really depends on whether the index would break down again. So let's check out weekly chart.
Weekly chart of Hang Seng Index (.HSI):
The flag shape is clearer on weekly chart. This bearish flag continuation pattern means a further plunge of the index.
As usual, the purple Pitchfork was added and it has been an extremely good instrument to predict HSI's movement.
Upside resistant is at 20,000 given by the middle line of Pitchfork. Interestingly, this is the same level as suggested by the short-term down-trend resistant on daily chart. And once we can see that the Pitchfork helps a lot on finding trend lines.
However, on weekly chart, it seems controversial that whether the index closed above or below the green line. It looks pretty much at the line. So we have to see what happens today.
If HSI really breaks down, then the next support given by the Pitchfork is at around 18,200. Breakdown of it means the index plunging to at least 15,800 as mentioned before.
My view is more on the bearish side. But it depends on whether HSI breaks down. If not, then it would rebound and face resistant at 19,500 and 20,000.
If yes, then the only level to be aware of is 18,200. I don't expect the index slumping any further than this.
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