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Sunday, July 12, 2009

Hang Seng Index Chart Pattern - Jul 10, '09

At the conclusion of last week's discussion, I had made the following observation:-

'The Hang Seng index chart pattern may head down some more.
Watch out for supports from the 20 day and 50 day EMAs. Bears may take control if the second support breaks.'

Like an obedient school boy, the index moved down below the short-term average and took support at the 50 day EMA.

The 6 months closing chart pattern of the Hang Seng (in blue) is now beginning to track the Dow Jones (DJIA) index (in red) more closely on the way down.

The slow stochastic, after a brief bounce above the oversold zone, is heading down again. The MACD is about to slip into the negative zone, as it continues to remain below the signal line. Both these indicators, as well as the dismal volumes, are indicating a further correction.

The RSI and MFI are providing some solace to the bulls, by climbing back up to their 50% levels. There may be a small bounce up from the 50 day EMA and the support level of 17400.

The bullish fervour seems to be ebbing. On a break below the above two supports, the index is likely to fall to the 200 day EMA, and the next support level of 16000.

Bottomline? The Hang Seng index chart pattern shows that the bulls may not have thrown in the towel yet, but prudent investors should book profits at every rise.

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