After the new year vacation, stock markets kept on surging and Hang Seng Index surged to more than 20500. US market dropped last Friday, with DJIA closed 0.58% lower.
There are not much important economic data released this week, so we won't expect huge fluctuation in equity markets due to these data. But still we have to be careful of any breaking news from Europe about sovereign debts.
Let's see this week's Hang Seng Index (.HSI)
Daily chart of HSI:
The index has been rising quite a lot these days. We can see that the index reached 20500 from 19000 within only few trading days. This might perhaps be due to the holiday atmosphere and the less bad news coming from Europe.
Nonetheless, the index broke out the support at around 20,200. The upper bound of the trading range is at 21,000. The bound is pretty wide actually.
Therefore, we can expect a resistant force at the level of 20,200. This might not be a very strong one because of the too-much surge in such a short period.
We have to be careful of any false breakout and HSI might pare its gains.
Weekly chart of HSI:
There is a significant breakthrough on weekly chart. Last week two-day-only candle successfully surged over the upper line of the purple Pitchfork.
As the index has been moving within this pitchfork for quite a while, any breakouts of it can be treated very seriously.
This is only the first candle going above the Pitchfork, so we will still need 1-2 weeks to further observe and hence decide whether it is false or not.
If the break out is confirmed, the next resistant will be at 21,500 which is 1000 points from now. The original bearish trend is reversed and we should further assess the big picture.
If we confirm that the break out is false, there will be a support at 19500, this only works in at most 2 weeks because the decreasing Pitchfork will keep on pushing the index to lower levels.
We can expect the index to get back to 18500 or even 18000 if the breakout turns out to be a small one.
This week is pretty crucial to let us decide under what trend the index is moving.
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