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Sunday, May 17, 2009

Hang Seng Index Chart Pattern - May 15, '09

Last week's Hang Seng index chart pattern was not quite confirming a change of trend from a bear market to a bull market. Investors were advised to wait for a correction before entering.

The 3 months bar chart pattern of the Hang Seng index is reflecing the effects of the correction that followed:-

Hang Seng_May1509

(Please right-click on the image; open it in a new tab or window for a better view.)

A 'reversal day' on Monday (May 11, '09) led to a 1000 point correction that dropped the index almost down to its 200 day EMA. Friday's up move took the 20 day EMA marginally above the 200 day EMA. But the low volumes were less than convincing.

Unlike the Sensex, which has been moving up almost without a correction for more than 2 months, the Hang Seng had several corrective moves on the way up. A comparison between the two charts would make it clear - the Sensex 20 day EMA is like a straight line whereas the Hang Seng 20 day EMA is more wave like. A straight line up move is less likely to sustain.

The slow stochastic has dropped below the overbought zone. The MACD has slipped a little and is touching the signal line. The ROC and RSI indicators are both moving down. The technical indicators are all turning negative. Higher volumes on some of the down days are another concern.

Bottomline? The Hang Seng index chart pattern is showing signs of a larger correction than the one we had last week. A good time to stay on the sidelines and wait for more 'green shoots' to appear.

2 comments:

Jeyaraj said...

The formation of new Strong Government may yield good results in the stock exchanges. Thanks to the dutiful voters.

Subhankar said...

Yes, Jeyaraj. The election results have been a pleasant surprise and investors are feeling euphoric.

Q4 results of a large number of companies have not been announced yet. They are not likely to be good. The budget is also expected to be a tough one. So investing after the budget is announced may be more prudent.