Sunday, June 14, 2009

Hang Seng Index Chart Pattern - Jun 12, '09

During the previous week's discussion of the Hang Seng index chart pattern, I had observed a sideways consolidation on diminishing volumes but had commented that the trend was bullish and the rally was likely to continue.

The Hang Seng index seemed to have liked what I had written. After dipping down and seeking support from the 20 day EMA on lower volumes, it once again jumped up on higher volumes and breached the 19000 level before closing a bit lower.

The 6 months bar chart pattern of the Hang Seng index shows that the bullish fervour is not showing any signs of abating:-

Hang Seng_Jun1209

The 20 day EMA has become an important trend supporter. For 3 months now, the Hang Seng index has not closed below its short term average (except one day in April '09). Watch it closely as a breach of the support from the 20 day EMA can lead to a bigger correction.

The 50 day EMA has moved above the 200 day EMA. The last hope of the bears have been snuffed out. All the three moving averages are now moving up with the Sensex - the bull market is well and truly on its way.

The slow stochastic, after a brief dip, has moved back into the overbought zone. The MACD, after a slip below its signal line, has gone up to touch it. The ROC has reversed direction from last week. The RSI followed more of a zig-zag path but is in the positive zone.

The Hang Seng index chart pattern is looking very bullish on every count - save one. Look at the last four RSI tops. They are gradually going lower. Compare it with the corresponding index levels, which are progressively higher by 1000 points or more. This negative divergence is the only fly in the ointment.

Bottomline? Stay invested and enjoy the ride. But keep trailing stop-losses and book partial profits.

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