What's about the downside? (2011-05-09 HSI analysis)

Due to snowballing fears of US economy, investors were losing confidence on stock markets. After death of Bin Laden, people expected an increase in US Dollar; however, it seemed the effect was not as powerful as we anticipated.

Hong Kong stock market experienced a streak of lose after the 8th consecutive fall on last Friday, longest since SARS in 2003.

Bad news is that Hang Seng Index dropped below important support levels in both daily and weekly charts.

Daily chart of HSI:

The red line is a downtrend line, which changed from resistance to support in late March 2011. On last Wednesday, the index plunged below and broke the support level.

On the other hand, 10-day Simple Moving Average crossed 50-day SMA from above. It might indicate bearish, but Moving Averages are lagging indicators, this is not a very strong signal.

Trying to find out on which level the support lies, I used a fibonacci projection with previous peak and trough. HSI broke the 100% level, so the next one would be 161.8%, which is at around 22,650.

The red downtrend line acts as resistance, so we can expect a strong selling force at around 23,400.

Weekly chart of HSI:

The purple uptrend and red downtrend lines had been existing on this weekly chart for a long time. Last week, HSI broke the red downtrend line from above, and showed a bearish trend. Luckily, 50-day SMA supported the index and stopped its slump.

I drew another trend line in green. This probably provides strong support to the index next week.

Again by drawing a fibonacci projection, I tried to find a support level on weekly chart. This time I used the high and low levels when the index touched the purple uptrend line and dropped. Interestingly, the support level I found is 22670, which is almost the same with the level on daily chart.

Resistance is given by the red down-trend line, which is at around 23,300.

To conclude, there is no doubt that given the current economic and investing situation, 23300-23400 would be an extremely strong resistance to the index. For the downside, it really depends on the economic data next week such as the consumer confidence, whether al-Qaeda would do anything in revenge to US and the detailed plan to aid Greek's financial crisis.

Important Economic Data this week (2011-05-08)

9-May (Monday)

16:30 Europe Sentix Investor Confidence

10-May (Tuesday)

09:30 Australia Trade Balance {Forecast: Rise from -205M to +500M}

10:00 China Consumer Price Index {Forecast: Drop from 5.4% to 5.2%}

15:15 Switzerland Consumer Price Index {Forecast: Drop from 0.6% to 0.5%}

20:30 US Import Price Index {Forecast: Rise from 9.7% to 10.5%}

11-May (Wednesday)

09:30 Australia Employment Change {Forecast: Drop from 37.8K to 17.0K}

14:00 Germany Consumer Price Index {Forecast: Unchange}

17:30 Bank of England Inflation Report

12-May (Thursday)

20:30 US Advance Retail Sales {Forecast: Slight increase}

13-May (Friday)

14:00 Germany GDP {Forecast: Rise from 0.4% to 0.9%}

17:00 Europe GDP {Forecast: Rise from 0.3% to 0.6%}

20:30 US Consumer Price Index {Forecast: Drop from 0.5% to 0.4%}

20:30 US U. of Michigan Confidence

Where is the ground? (2011-05-06 Gold and Silver analysis)

Hang Seng Index wasn't moving a lot yesterday. Would it be able to recover its position above the up-trend line on weekly chart?

After speculators like Soros started to sell Gold and Silver, both of these items slumped these few days. Gold dropped from 1576 back to around 1500, while Silver plunged to as low as 38. We might wonder: where is the ground? Let's take a look.

Daily chart of Gold (XAU):

There were four consecutive big black candles, following the record high at 1576. The green line is a medium-term uptrend line, which can provide support to Gold.

Furthermore, I have drawn a fibonacci retracement using the low and high in 2011. The price of gold just broke 23.6% level, and was heading down to the next level.

Though 1,500 could possibly be a strong psychological support, we couldn't find technical support there.

Instead, the green uptrend line should be a strong one to stop the price from further falling below 1470. Indeed, the level of around 1470 is also 38.2% fibs level. We can expect strong buying-force here.

Daily chart of Silver (XAG):

The chart of Silver looks simpler. I have identified three possible uptrend lines, shown in red, green and purple.

Silver price broke the red short-term uptrend line two days ago, and was supported by the green line.

Level of 38 appeared to be quite a strong one; but in fact, the trend line is not as valid as the others as we can see there wasn't much resistance/support in Jan-Feb 2011. I doubt the strength of this line.

Purple one would probably be the bottom line. This should be an extremely strong one which provides support at around 33.

Good time to long? (2011-05-05 GBP/USD analysis)

Hang Seng Index dropped 1.35% yesterday, reaching as low as 23,230 and closed at 23315. On daily chart, the level of around 23,250 successfully supported HSI, giving power to it for a little bounce yesterday. However, on weekly chart, it appears that the index did break the support line. This is not a good signal, but still, there are 2 trading days left. Be aware guys.

Let's see GBP today as I found it good to trade.

Above is the daily chart of GBP/USD. The Pound retreated somehow 2 days ago, most likely because of death of Bin Laden which resulted in strengthening of USD.

Reaching the green up-trend line, GBP managed to bounce, keeping itself within the trading range (green and red lines).

MACD is touching its EMA, we would have to wait two more days to confirm whether they cross or not. If so, there would be a bearish cross indicating weaker GBP.

For the upside, the resistance will be at 1.678 given by the red up-trend line.

GBP would probably break the pennant in next few days, and as continuation is suggested by pennant, I would anticipate a continue in rise of sterling. Should be a good time to long GBP.

False Double-top? (2011-05-04 0305.HK analysis)

Above is the daily chart of Dragon Hill Wuling Automobile Holdings Ltd (0305.HK), which is a small-cap stock priced 1.09 currently.

Yesterday this stock surged 5.83% which caught my attention. I analyzed it and found somehow interesting result.

From the chart, we could see that starting from mid-March, the stock price has been rising from 0.87 to around 1.16 in early-April. Then a double top was formed.

Last week, led by the poor markets, 0305.HK dropped below trough level. We might have thought about shorting the stock at this point; however, yesterday it managed to get back above this level which showed a potential bullish signal.

The price is still been limited by the 20day Simple Moving Average. If it breaks this resistance, we could expect it to reach 1.16 without difficulty, which is around 5% rise.

Of course we are not looking for such a little gain. Therefore, we have to observe whether the buying-power is strong enough to break the double top level as well.

If so, 1.30 is expected. This level would be the next resistance.

Tracing back in the past (late October), the stock blew off from around 0.65 to 1.6, which was around 146% surge. Interestingly, the price stopped rising there and started sliding down, but I think that there was no obvious evidence on distribution stage.

Therefore, another blow-off might happen again. Let's just put this stock in our watch-list.

Topping? (2011-05-03 HSI analysis)

Another vacation has passed. Time really passes fast and it would be my last month of my 3-year Undergraduate study.

Last week was not a good week, closing with three consecutive black candlesticks. While there was a break-down on daily chart, no bearish signal was given on weekly chart. Big picture is still unclear enough to make any decision.

Daily chart of Hang Seng Index:


Obviously, after the three black candlesticks last week, the index broke the red short-term up-trend line. This isn't a good signal for the next short-period of time.

The green down-trend line still holds, expected to provide a bit support should the index fall that low, at around 23,250.

50SMA appeared to give even better support last week, forcing the candle on Friday to form a long lower shadow.

Weekly chart of HSI:


Fortunately, HSI is still within the diverging triangle. It is still expected to be traded in this range.

Last week the index closed at near the lower bound of the triangle, if the line could hold, HSI could be supported and rebounce. Bottom line would be at around 23,400.

Volume is shrinking while MACD is falling, they are signals of topping. It seems like a critical time this week.

Important Economic Data this week (2011-05-01)

3-May (Tuesday)
12:30 Reserve Bank of Australia Rate Decision {Forecast: Unchange}
17:00 Europe Producer Price Index {Forecast: Unchange}

4-May (Wednesday)
17:00 Europe Retail Sales {Forecast: Unchange}
22:00 US ISM Non-Manufacturing Composite {Forecast: Slight increase}

5-May (Thursday)
19:00 Bank of England Rate Decision {Forecast: Unchange}
19:45 European Central Bank Rate Decision {Forecast: Unchange}

6-May (Friday)
19:00 Canada Unemployment Rate {Forecast: Unchange}
20:30 US Change in Non-farm Payrolls {Forecast: Decrease}
20:30 US Unemployment Rate {Forecast: Unchange}