After finding strong resistance near the highest point of March, at 26764, the Hang Seng index drifted lower, closer to the 200-day EMA. This move lower may be considered as a temporary correction, because the price is still trading above a short-term tentative upside support line taken from the low of May 29th. Even if the index does slide a bit further south, if it is able to continue balancing above that upside line, we will stay positive, at least with the near-term outlook.
If Hang Seng does reverse higher from the aforementioned upside line, it could move back to the 25850 obstacle, a break of which may open the door to the 26764 barrier, marked near the high of last week and near the highest point of March. Initially, the index might stall there for a bit, but if the buying stays strong, a break of that barrier could set the stage for a further uprise, as the move would confirm a forthcoming higher high. That’s when we will aim for the 27215 level, marked by the low of February 21st.
Looking at our oscillators on the daily chart, the RSI and the MACD, at the moment both seem to be pointing slightly to the downside, which could support the idea of seeing a further correction to the downside. That said, the RSI remains above 50 and the MACD is still well above zero, while coinciding with its trigger line. Despite a recent small decline, the indicators still show positive price momentum, which is in-line with the scenario of seeing more upside later on.
Alternatively, if the aforementioned upside line breaks and the price falls below the 24800 hurdle, marked near the highs of June 19th and 26th, that could spook the remaining bulls from the field, allowing more bears to join in. Hang Seng could then travel to the 24122 obstacle, a break of which may clear the path to the 23637 level, marked by the low of June 15th.
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