HSI – Signs of a Bear run

Trend: Downtrend , 20ma down, MacD below 0

Support: 20300, 19880, 19400

Resistance: 20680, 21150 (50ma, 100ma & 200ma), 21410 (20ma close)

Observations:
Candlestick – Black candle (Yesterday)
Histogram –1R then 1G not significant. No bullish divergence is seen.
RSI – Slightly below 30%. No bullish divergence is seen.
Stochastic – Bullish crossover seen. At oversold.
Bollinger Band – Closer to lower band.

Conclusion:
The impact from STI’s sharp drop mainly came from China government’s measure on the economy. This impacted HSI’s performance too. Many had also understood that HSI’s movement could affect STI’s performance too. So let’s look at how HSI perform and might likely affect STI’s behaviour.

Looking at the current level of HSI comparing to the moving averages, HSI is very clearing showing that it is trading in a bear market right now as it is trading below 200ma. This indicates that the downtrend could last for a pro-long period. Base on yesterday’s price, it seems that HSI is holding above the support of 20680. But base on current HSI’s trading level, it is way beyond 20680. (Currently at around 20315 level). This implies that HSI is going for a lower low, thus confirming its downtrend movement. It immediate support level is very close to its current trading level, 20300 level. One should not be surprise if HSI bounce off this 20300 level as it might form a lower low here. Looking at the indicators, it is stating its oversold currently, hence, it greatly enhance the change of a lower high being formed currently.

But if the rebound happens, the upside should be capped as a lower high will be formed. Immediate resistance will be at 20680 level but a much strong resistance will be at 21150 level. Hence, any rebound is not expected to go beyond 21150.

What to watch out for this week:
1) There could a high chance of rebound, but it will be capped at 20680 or 21150 level
2) But if 20300 breaks, it means more downside to be coming and next support at 19880 level which is really far away

Trading strategy to adapt right now:
- Can adopt counter trend techniques. Watch out for bullish signal from candlestick or indicators. But have a strict profit taking target and stop loss.
- Wait for the rebound to resistance level and when a bearish signal is formed, initiate a short position. (Less risky)
- If 20300 level fails to hold, adapt breakout strategy as the next support level is deemed to be quite far away for good reward.

*Disclaimer applies