More on long-term (2011-10-03 HSI analysis)

Had a really busy week with lessons everyday and test on Friday about Fundamental Tools. School officially starts and I guess I would be even busier. But that's life for a MSc student.

Back to the market. Greece finally approved 6.6Billion Euros of austerity measures till 2012. But this might not necessarily be a good news to stimulate the markets 'cause it still depends on whether Greece would be aided.

Hang Seng Index (HSI) did drop slightly below 17,000 last week but was able to stay above this level, and closed slightly lower than the Open last week. In general, it only had a short body for last week's candlestick.

Weekly chart of HSI:















This week I have zoomed out a bit on the weekly chart, and would post a monthly chart analysis as well. Short-term movements are really hard to predict in such event-driven market.

Andrew's pitchfork as usual, as the index plunged below the fork, the lowest line changed its role as support to resistant, and successfully stopped HSI from surging higher at around 18,000.

This is not a good sign as it tells us that 18,000 becomes a strong resistant zone. It takes time for the index to recharge and break out.

Green line represents a medium-term support. We can see there will be support to the index at around 16,200.

Indeed, the two fibonacci retracements give support at around 16,150 and 15,670. We can expect a strong support at this zone.

HSI closing at 17592 last week means that there is still room for the index to slump. I expect it to drop to around 16,100.

Monthly chart of HSI:















Monthly chart is another good example of Technical Analysis at educational purpose. The chart shows the monthly candlestick of Hang Seng Index since 1993.

The retracement is the same one as that on weekly chart, suggesting a support at around 15,700.

The reason why I said this chart is good at educational purpose is because of the pitchfork. We can see that since 2003, HSI started to move upwards along the fork, and broke down in 2008 after Financial Crisis.

After that, the fork became resistant and resisted the index two times in 2009 - 2010. Together with the retracement, we can now understand the tops of the index.

So what's next? It seems like there is no supportive power until 23.6% retracement at around 15,700. And then there should be technical rebound.

The green line represents a very long term support. HSI has been above this line since 1994 and it shows a 17-year upward trend. This is the ultimate support, and I don't think break down would happen unless there are wars in Hong Kong.

Hope today's long-term analysis would give you a more general picture of HSI. I suggest if you are not watching the markets every minute, you should not do short-term trading these days. Such news-driven markets could easily reverse intraday trend and might make you loss quite a lot.