Hong Kong Market still in a correction

The Hang Seng Index (HSI) broke the 15,000 points resistance level recently and went to as high as 15,781 before it pulled back below this resistance level to close at 14,220.79 points yesterday. Therefore, it looks more like a test to the resistance level than overcoming it.

The Relative Strength Index (RSI) indicator is in covergence with the HSI indicating a strong short term bullish momentum. However, the 60 and 90 day moving averages are still declining suggesting that the mid to long term trend is still down. The 90 day average is at 16,200 points and the HSI can only overcome its long term down trend if it is able to penetrate above this level.

As long as the HSI stays below resistance level of the wedge (See chart below), which is also near the 90 day average, the HSI is in a long term down trend correction. This is because the current bullish movement has formed a rising wedge in a major down trend. A rising wedge is a bearish continuation pattern and there is a high change that the down trend is going to continue especially if the HSI breaks below the support level of the wedge. (Please refer to chart below). The target for the down trend continuation using the wedge pattern is at 8,800 points.


Daily HSI chart as at 24 December 2008 (10:40 AM +8:GMT) using NextVIEW Advisor. Click on chart to view enlarged chart.

As at 10:40 am (+8:00 GMT), the HSI is at 14,165 points after opening with a gap down at 13,855 points.

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Article contributed by Private Trader, Market Expert, Trading Coach and Chief Market Strategist of Nextview, Mr. Benny Lee. For more articles and commentaries from Benny, click HERE.

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