Last week was a disaster for long-only investors, but might be a great week for those who was in short positions. Operation Twist proposed by the Fed and concerns resulted in plunges in world's stock markets.
Hang Seng Index broke 18,000 and reached as low as 17,373 last Friday. After checking the daily chart of HSI, it appears to me that we can hardly tell anything from daily chart.
So I decided to move on to weekly chart.
As mentioned before, a bearish flag was identified clearly on this chart. In the middle of the bearish trend, the red flag indicates a further bearish trend.
As usual, purple pitchfork is the main tool here. We can see that the index broke the lowest line of the fork, meaning a even steeper downward trend.
Using the high in late 2010 and the low after financial crisis, we can see that HSI just broke the 50% retracement level too. Next retracement level is at around 16,100.
So this week depends on whether HSI would continue dropping or get back into the pitchfork.
If HSI drops again, 16,100 will be the next support. Pitchfork becomes a resistant at around 18,200.
If HSI bounces, it is still under a bearish trend, but will slump more slowly. 19,500 will be a major resistant level.
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