During the second half of last week, we saw the Hang Seng index declining and ending up testing a medium-term upside support line drawn from the low of March 19th. That upside line did a good job in not allowing the price to depreciate further and instead it acted as a good bouncing ground, from which Hang Seng pushed back up. Today, the index overcame one of its key resistance areas, at 25278, which is the high of last week, this way showing willingness to continue with the journey north. For now, we will take a positive approach, at least for the near term.
A further push higher, away from the 25278 hurdle, and a rise above the 200-day EMA could send Hang Seng to the 25783 obstacle, or even the 26372 mark, which is the high of July 9th. The price might stall there for a bit, but if it struggles to overcome it straight away, this might lead to some correction lower. However, if the index is not able slide back below the 200-day EMA, the buyers may get interested again and enter the game. Such actions could help Hang Seng to rise back to the 26372 hurdle, a break of which might open the door for a move to the highest point of July, at 26737.
Our oscillators started pointing slightly to the upside again, which suggests there could be more upside in the near term. In addition to that the RSI is back above 50 and the MACD is just fractionally below zero, but has climbed above the trigger line.
Alternatively, if the index drops heavily, breaks the aforementioned upside line and slides below the 24170 hurdle, marked by last week’s low, that would confirm a forthcoming lower low and potentially open the door for further declines. Hang Seng could then drift to the low of June 15th, at 23637, a break of which may clear the path to the 23173 level, marked by the high of May 29th.
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