Though it looked like too volatile to trade, the rebound after reaching ~16200 was not too hard to catch. It is the level supported by a medium-term upward trending line. Macao Gaming stocks rallied greatly, with over 30% jump in stock price in just two days (Thursday and Friday). Given their performance, I guess this week's focus might be on them as well.
One more extremely important issue. The last Policy Address by HKSAR Chief Executive Mr. Donald Tsang would be revealed on Wednesday. It is expected that he would talk more about property prices and policies, with a possibility that more flats are built for Home Ownership Scheme which could impact the property industry. So for those who are holding any these kinds of company would have to be prepared for any event risk on Wednesday.
Now let's get back to our regular HSI analysis.
Daily chart of HSI (finally):
I haven't been posting daily chart for two weeks because I could not get any clue from the previous charts. But this week it seems to be a bit clearer.
The orange Andrew's Pitchfork was the normal one. The index broke it in mid-September. The lower line became the resistant to HSI (which was shown in late September).
I have identified another Pitchfork, which is a short-term one, shown in purple. Hang Seng Index was following the upper channel and slid since September 2011.
After the rebound last week, the index is currently testing the upper line of the Pitchfork. The level represents a strong resistant line which HSI did not go beyond since September.
Other than the current pitchfork, there are two another big resistance forces at around 18,000, which is around 300 points from now.
The first one is of course the previous Pitchfork shown in orange. This is just the same case as that occurred in late September.
The second one is the fibonacci retracement. By using the high in late August and the low last week, we found that 18,000 is the 38.2% retracement level. This also resists the index.
So daily chart is telling us that HSI would need an extremely strong buying power in order to break out these resistant; otherwise, this week would be a bearish week.
Weekly chart of HSI:
The orange pitchfork is just the same as that one on daily chart, while the fibaonnci retracement is a different one.
The green upward trending line was able to support the index well last week, stopping HSI to slump below 16,000.
Using the low in Oct-2008 and the high in Oct-2011, I drew another retracement. We can see that ~16,200 is the 61.8% retracement. So actually there were two forces supporting the index last week. We have no surprise why the rebound was so strong then.
So the situation is getting a bit interesting now, or actually I should say not interesting from traders' views.
For the upside, the previous pitchfork with down-trend is resisting the index. For the downside, the medium-term up-trend green line is support the index. HSI is now in the middle, and both sides are pretty hard to break.
Still remember my post on VIX last Friday? I suggested that its time for VIX to take some rest and calm down. This also means that the volatility would drop. Stock markets either move gradually upwards or consolidate (it is always hard for the markets to move downwards slowly).
Considering also the VIX, I believe that HSI would start moving sideways, with the current range of 16200-17800. This range is definitely narrowing given the converging support and resistant. This also means the purple pitchfork on daily chart will collapse (which is not a surprise as its slope is too steep for a long-lasting trends).
So the coming two weeks would be a cool-down period after fluctuations in past few weeks. This is a good period for us to do more research and find out how most stocks are performing and whether the markets would end its bearish movement or not. And we can grab some time to find out any undervalued stocks.
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