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Sunday, August 2, 2009

Hang Seng Index Chart Pattern - Jul 31, '09

Not a particularly promising week for the bulls, though the Hang Seng index chart pattern gained 600 points week-on-week. Why so? Because the highest volume of the week was on Wed. July 29, '09 - which was a down day.

Volume pressure is critical for the sustenance of an up move. From Mar '09 through May '09, the bull rally continued on strong volumes. In June '09, the Hang Seng consolidated sideways, but volumes remained strong. But in July '09, volumes have reduced while the index is going up.

The 6 months closing chart pattern of the Hang Seng index shows that though this may be a time to be cautious, there is no cause for alarm yet:-

Hang Seng_Jul3109

The technical indicators are all supporting a continuation of the bull rally. The 20, 50 and 200 day EMAs are all moving up along with the index.

The RSI corrected from the overbought zone and is just below it. The MFI is climbing towards its overbought zone. The slow stochastic is in the overbought zone and showing signs of staying there for a while. The MACD has not quite reached its previous high, but is well above the signal line.

Some of the negative divergences observed in last week's analysis of the Hang Seng are no longer visible. For the sake of the bulls, let us hope that volumes will pick up in the coming week. Otherwise, they will remain vulnerable to a bear attack.

Bottomline? The Hang Seng index chart pattern will continue to have a down side target of 18850 and a up side target of 21350. Unless 21350 is convincingly pierced, the bull market may get halted. Partial profit booking is encouraged.

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