HONG KONG STOCK MARKET - GEARING FOR DOWN TREND

Hong Kong stock market has been trading in a down trend correction since October 2008 and I have mentioned this in my last article in December 2008. The correction has formed a down trend wedge pattern in the Hang Seng Index (HSI) with a defined support and resistance and I have mentioned the HSI is expected to test the resistance level and there is a high chance that the down trend may continue, if it breaks the wedge support level.

On the 15th of January, the HSI broke below the support level at 13,800 points and has been staying below this level until today. The HSI has been falling for the past 6 days is currently at 13,339.99 points. Although the HSI is higher than the previous day's close, it closes lower than the opening today which shows that the sentiment is still bearish.

The momentum in the long term is strong downwards. The short term bullish momentum has started to become bearish in the past few weeks. Relative Strength Index (RSI) on both weekly and daily charts is forming swings lows. Therefore there is a high chance of the down trend would resume IF the HSI is unable to climb back above the wedge support level which is currently at 14,000 points. The downside technical target for the wedge pattern is at 8,800 points.


Daily HSI chart as at 19 Janaury 2009 using NextVIEW Advisor. Click on chart to view enlarged chart.

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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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