Technical Update for Hang Seng Index

Hang Seng Index – Monthly Chart: Testing significant supports

  • The index is testing the 250-month (red line) moving average which is around 20,616 now and the lower boundary of a bullish channel (green lines, formed since 2009) at around 20,530.
  • From the monthly perspective (long term view), 250-month moving average is very important because Hang Seng index never been able to break below it since 2008.
  • On the other hand, the long-term bullish channel (green lines) also plays support role sine 2009. even 2011 and 2016 lows not able to close below it from monthly close.
  • In this case, it is quite significant to see whether Hang Seng Index will close below it this month, or at least weekly close.
  • As monthly RSI is below 40% now, indicating that the index is relatively cheap from long-term view. I keep my view that investor can consider continue monthly stock contribution for 2800.HK for long-term investment.

Hang Seng Index – weekly: Where are next supports

  • From weekly chart, the index broken below a long-term trendline (pink line, formed since 2008) 2 weeks ago and accelerated on the downside.
  • We can see that the index open with a bearish gap on Monday and has broken below 2020 low with a black candle on Tuesday close.
  • It is currently testing the 250-month MA (around 20,616), which plays significant role since 2008.
  • Weekly RSI and MACD is also turning down.
  • If in case the index failed to support by 250-month MA and bullish channel bottom this Friday close, the next key support will be 19,594 (2016 May low) and then 18, 278 (2016 low).

Hang Seng Index – Daily: Oversold now, a ST technical rebound cannot be ruled out.

  • From daily view, Hang Seng Index turned down below the upper boundary of a broadening formation pattern (pink lines) with a double-tops pattern.
  • After broken below the neckline of double tops pattern at 23,470, HSI hit its measured target at 21,890 last Friday.
  • The index has broken below the lower boundary of a broadening formation pattern (pink lines) with a bearish gap on Monday and continued drop on Tuesday. It is now testing the 250-month moving average around 20,616.
  • Showing that the double tops pattern is quite success this time as many successful double tops pattern normally drop far lower than its measured target (21,890).
  • However, the daily RSI is oversold now at 21.13%, a technical rebound above the 250-month MA cannot be ruled out. The next resistance will be 21,327 (lower boundary of bearish gap) and 21890 (measured target of double tops pattern + near upper boundary of bearish gap.)
  • However, unless we see a bullish reversal pattern form. Otherwise, we still keep the negative view even a technical rebound post.

Where is last stand for HSI from technical view?

  • As the recent rapid drop is mainly driven by Ukraine war, the market is very volatile and difficult to predict where is low.
  • However, from a technical point of view, if in case Hang Seng Index break below 250-month MA (red line) and drop further. The last stand will be the very long-term bullish trendline (formed since 1989), estimated to be around 17,200.
  • This trendline has been playing a key support for every extreme low for the past 33 years. Supporting 1989, 1990, 1998, 2003 and 2008 lows.
  • Therefore, it will be the last stand from a technical view for HSI. We cannot imagine if it even close below this trendline with black candle and monthly close.

Joyce Chan CMT, CFTe
Technical Analyst

UOB Kay Hian Hong Kong

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