Tag Archives: Hang Seng

Dilemma of dynamic patterns

Good day traders,

As the market would have it with me so often, the exact opposite of my sentiment usually happens. Ever since my last post, indices around the world have rallied hard. The sharp devaluation gave long-term players an opportunity to snap up bargains on the market. As we cross over to the latter half of the year, indices are either at or above their 200-day moving averages, and having made higher highs and higher lows after the scare in January. Unsurprisingly, price action over the last few months have developed a bottoming pattern of sorts: specifically, unconfirmed, inverted head-and-shoulders patterns are showing up on many charts. It may be a case of the breakdown from large, upright head-and-shoulders patterns resulting in a consolidation instead of further downside.

With every wek and month of upside, it does dent my confidence of the longer-term decline I am expecting. Being a long-term player is analogous to a huge ship’s maneuverability compared to a small speedboat: I cannot and will not change my outlook until way past the bottom. It is tempting to switch from a bearish to a bullish outlook now but I am still not convinced with the recent rally.The dilemma I face now is because of the presence of dynamic patterns that are suggesting upside to come. I use the term dynamic pattern to mean general price patterns that have a particular shape in recent history – these patterns do not have conventional names like the head and shoulders and others; or they may but with a certain “twist.” I will illustrate what I mean in the charts below.

The first chart is of the CAC 40. The turbulence late in 2014 produced a descending, broadening wedge pattern, which also turned out to be a inverted head and shoulders. Early in 2015, the market took off and the CAC 40 blasted off to new, major highs. Now, steer your eyes to the right half of the chart, and you will see a similar phenomenon. It is not so much the small, topping head and shoulders that matter but the similarity between the two huge, descending, broadening patterns. I have veered away from trading patterns in recent years but it is magnificent to see such huge patterns unfold, and even more important to gauge their sucess rates. Ditto for the STI and Hang Seng Index- albeit making reference to an inverted head and shoulders in 2011-2012.

A1

Moving on, I have the Dax. The dynamic pattern in the Dax starts with a good, long uptrend before a downward-biased contractional period. Then, price moves down in a classical a-b-c Elliot Wave retracement pattern. In this dynamic pattern I am identifying, the Dax then goes up and congests for a little while before flying up and away. Now, look to the right half of the chart, and see if you agree with my judgment of  the same phenomenon brewing. With such beauty in the charts, how can I ignore the case for upside?

The next chart is of the S&P 500. Bear in mind that I have highlighted the presence of a general, large, rounding pattern – a stalling in the long-term, multi-year bull run. Within that large pattern is wht we now see as a clearly-defined head and shoulders with a right shoulder breakout upwards some time in March of this year. Price is currently testing the head region. Take note of the smaller head and shoulders that is also undergoing a head test now. In this case, this dynamic pattern does not indicate anything since the head test is still ongoing.

a2

In the next few charts – FTSE 100, Hang Seng, and Russell 2000, you will see what I mean by the large, rounding, topping patterns strting to give way to what seems like a reversal, inverted head and shoulders. It is certainly not the first time I see such a phenomenon but my experience tells me it is ust about fifty-fifty where the market will head to next. Sometimes it carries on higher and proves the inverted head and shoulders to be correct – rendering the earlier head and shoulders to be invalid, or the market dives lower and proves the inverted head and shoulders (usually the smaller of the two) to be a false reversal indication. Tough call is it not? Such is the market!

a4 a5 a6

All in all, I am still wary of the multi-year bull run that has lost some steam in the last 2 years because the looming, gravely topping pattern is still intact; however, there could be short-term plays to the upside.

All analyses, recommendations, discussions and other information herein are published for general information. Readers should not rely solely on the information published on this blog and should seek independent financial advice prior to making any investment decision. The publisher accepts no liability for any loss whatsoever arising from any use of the information published herein.

 

 

Hang Seng rallies out of symmetrical triangle

Good day all,

I have a quick post today on the Hang Seng index. While the STI consolidated in a downward parallel channel for the most part of the latter half of 2011, the Hang Seng formed a fairly large symmetrical triangle. Participating together with the other global indices, the Hang Seng index surged up recently and posted a 6.5% rise to break out of the symmetrical triangle. A quick projection based on the triangle puts the Hang Seng at the 23,000 region. I do not expect the Hang Seng to get up there so quick, so that will probably be a 4-, 5-month target. Right now, the 200-day MA is in play. In fact, it has been quite some time ever since the Hang Seng approached near to the 200-day MA. I am somewhat expecting a slight retracement for global indices since the recent upside we are seeing will have to take a breather. So, what better time for the Hang Seng to meet her 200-day MA.

A chart of the Hang Seng SGD1 contract on IG Markets:

All analyses, recommendations, discussions and other information herein are published for general information. Readers should not rely solely on the information published on this blog and should seek independent financial advice prior to making any investment decision. The publisher accepts no liability for any loss whatsoever arising from any use of the information published herein.

 

Weak showing

Evening all,

Recently, the stock market has been weak, and indices all over the world have been sliding down. Over the last few weeks, the main theme I gathered from the papers was news of weakness in the global economy. That has probably been the main factor in the weak showing from equity markets. The prevailing debt problems in Greece always seem to pop up now and then, and not so positive data from the States has been causing selling pressure in the stock market.

As you know, I am holding a year-long bullish stance on the market. If  I do not remember wrongly, I even expected the STI to smell 3400. Now, the breather that I keep thinking the market has been taking has lasted for 2 months already. In April ’11, the STI was at the 3170-3200 region; now, the STI has just set a 3-month low at 3020. This is not good at all, especially with regards to my projection. My last two posts on the STI was showing potential bull flag patterns. Sadly, the STI has not surged up as I was hoping; instead, these flags are now invalid. With all the gloom out there, I decided to take a good look at the charts to see what I can make out of the recent weakness in the market.

The first chart below is the weekly candlestick chart of the STI. Right now the index is testing critical support at the bottom of the upward parallel channel. The last time we tested the bottom of the channel was in the first quarter of this year. I remember those days were trying times as I fought with my emotions – the chart told me that support was being tested, whereas my emotions were driven by the negative sentiment out there. In the end, the chart prevailed, and the STI staged a quick 6% rise to stay in the channel. Now, depending on how you draw your trendlines, the STI can actually be seen as having broken out of the channel. For me, I believe one should sometimes allow for volatility; therefore, I still believe the STI is testing support. Basic technical theory will suggest that now is a moment to buy in since we are at support. 

It is intersting to note that the STI has just fallen below the 50-week MA, and the 200-week MA is starting to slide down. These are certainly not bullish signs to take from a chart.

I have a some charts of different indices around the world. Take a look at them below. For quite a few of them, the indices seem to be at critical support levels too – which ties in with what I see on the STI’s chart.

   

In conclusion, I see many indices at an important point now. I am still a general bull, and every week I am hoping for a rebound. On the chart, it does seem to me like a rally is overdue. However, if the market is going to continue sliding south, as a chartist, I may have no choice but to drop my bullish stance. Let’s see how this goes.

Taking a look at regional indices

Hello all,

I was just taking a look at the charts of regional indices after the good week we had with regards to the stock market.

I have decided to share with you all some interesting things that i have seen on the charts.

First off, lets take a look at the Hang Seng. The rally of 2009 brought the Hang Seng up to 23000. A gradual correction took it down to test the 200 day MA. In testing the MA, i have identified an upward parallel channel that the Hang Seng traded in. I believe the Hang Seng should be able to test 23000 soon, based on the bullish pattern we have, and also the bullish indication from some indicators.

Similarly, the STI has recovered from its immediate correction from highs of the 2009 rally in an upward parallel channel. What i like about the STI is that we have cleared the highs, with every day of last week’s trading closing above the previous high. Thats a positive sign, complimenting how we are well above the important pre-crash region of the 2700s. I do not get anything of importance from the indicators, so i shall not discuss the indicators now.

Lastly, lets take a look at the BSE Sensex. The Sensex also corrected from its 2009 rally and came close to the important 200 day MA. It did not touch the MA but shot back up and gained 15%. Just like the STI, its currently just above the previous high set in january during the christmas rally.

Based on what i see on the charts, i can only think that the stock market will continue to rally. Forget about whatever fears are coming out from Greece or the debt problems in the States. What the charts are telling us is that we are only going to continue in the bull market that started last March. Yes, along the way corrections are inevitable, but in the long run this bull will continue charging forward.

All analyses, recommendations, discussions and other information herein are published for general information. Readers should not rely solely on the information published on this blog and should seek independent financial advice prior to making any investment decision. The publisher accepts no liability for any loss whatsoever arising from any use of the information published herein.

Short-term analysis on equities

Hello all,

Today i would like to talk a little about some indices; the S&P, Shanghai Stock Exchange and the Hang Seng.

First lets look at the S&P. We have a formation on the chart. I have identified a potential bull flag pattern, that should lead the S&P up to the 1100s if broken. Indicators are pointing upwards, including the ADX as shown. The ADX signal line is below 20, telling us that a break out may not happen today or this week, but we have to take the divergences of the +ve and -ve as bullish looking.

Next, we shall look at the Hang Seng.

On the chart, i have drawn a parallel channel that the Hang Seng is trading in. As you all might have known why fundamentally, we have an ugly red candle last Friday. Nevertheless, technically, we violated our channel, only to return back up straight away. Indicators are slightly bullish on the Hang Seng, and since we are up in the channel, we should look for upside in the Hang Seng for the next week.

Lastly, we have the Shanghai Stock Exchange. Highlighted on the chart are higher lows, from the pullbacks afte run-ups. I like how we keep making higher lows, this is indicative of a bullish market. The ADX is also showing positive signals. The +ve and -ve lines are starting to converge.

Alright, i have just posted a brief analysis on 3 indices and see if your homework agrees with mine. I would be looking for positive trading sessions in the week and next.

 

Hang Seng at major test area.

People, this is The Hang Seng index.

It is at an area now, that was where price was before the free fall last year. We already visited the 21000 level about a month ago. A double top may be in the making, which is also probably why there are people asking for a correction. Double tops produce drops. But we have not completed the pattern, its just a possibility. Right now we are at 21400. The red rectangle you see is where i would think the Hang Seng has to get over, for the bull run to continue without any major problems. The STI is also in a similar predicament, as discussed before. If this week turns out to be a “ranging week” with no new lows or highs made, i may want to wait till next week, before deciding whether the major correction is going to happen soon.

Chart by ChartNexus.com

hang seng

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