This week there are no highly influential important economic data revealed; therefore, it would be breaking news, perhaps by Sarkozy, Merkel and Papademos, that is going to affect the markets.
Daily chart of HSI:
We can see that the index has surged from 18,500 to 21,000 since early January 2012. Such abnormal uptrend can be explained by the breakout of the orange flag.
HSI even broke out the medium-term down-trend line two weeks ago. This breakout was confirmed by price movements afterward.
It reached 21,000 yesterday and dropped around 300 points, back to 20700. Obviously, the momentum for it to fill the gap in early August 2011 is still not enough. If the index could be able to break out 21,000, the next resistant is at 21,600, which is just a very small range.
Though the purple Pitchfork is trying to support the index, the medium line looks a bit fragile and it is quite easy for HSI to get into the lower area of the Pitchfork.
Therefore, this week should be a bearish week for HSI, and it should be going down to the consolidation area at around 20,300.
Now, let's further analyze the weekly chart.
Weekly chart of HSI:
Clearly the index broke above the purple Pitchfork which has been beautifully restricting the price movement since Q2 2011.
Given the current pretty strong markets, it is extremely unlikely that the index would plunge into the Pitchfork; therefore, we can treat it as a true breakout, and the Pitchfork is no longer useful.
Retracement levels show that there is a resistant at 21,600, which is the same as that on daily chart should the index break out 21,000. This is a very strong level, and we can find short opportunities if the index really reaches this level.
As mentioned, the room for surging is absolutely limited. It is not a good time to long any stocks, and if you are having long positions, it might be a good idea to hedge or sell the stocks. The market will be under corrections in these few weeks.
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