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Friday, October 2, 2009

Stock Index Chart Patterns - Shanghai Composite, Hang Seng, Korea KOSPI - Oct 2, '09

A holiday shortened week in the Asian markets allowed the bears an opportunity to further put the bulls on the back foot.

Shanghai Composite index chart





In 3 days of trading, the index closed 2% lower. Two down days on Sep 28 & 29 took the index close to the 200 day EMA. The marginally higher close on Sep 30 failed to make much impression on the technical indicators.

The 20 day EMA is below the 50 day EMA and both are moving down, indicating bearishness in the short and medium term. The 200 day EMA is beginning to flatten. As long as the index remains above the long-term average, bulls have some hope. But for how long?

The MACD is not only in negative territory, but has gone below the signal line. The ROC is also in the negative zone. The RSI is below the 50% level and moving down towards the oversold region. The slow stochastic is about to enter the oversold zone.

All the technical indicators have turned bearish, and the index is technically ready to move back into a bear market.

Hang Seng index chart




Sensing the weakness in the Shanghai Composite index, the bears have launched a determined attack on the Hang Seng index. On Mon, Sep 28 '09, the index was pushed down towards the 50 day EMA, only to jump back up to the 20 day EMA. Today's (Oct 2) trading saw the index once again seeking support from the 50 day EMA.

The technical indicators are not as bearish as those of its big brother, but are looking weak nevertheless. The MACD is still positive, but moving down and is below the signal line. The ROC is at the '0' level but ready to drop into the negative zone. The RSI is below the 50% level. So is the slow stochastic - and both oscillators are moving down.

Both the 50 day EMA and 200 day EMA are still moving up, though the 20 day EMA has flattened. The bull rally has been temporarily halted. Could a change of trend follow soon?

KOSPI (Korea) index chart



The previous look at the KOSPI was 4 weeks back. The index was bullish then, but there were some negative divergences in the technical indicators. The index surged upwards and hit a new high of 1723 on Sep 23 '09. But it turned out to be a 'reversal day' that halted the bull rally on its tracks.

Since then, the index has been making lower tops and lower bottoms and closed below the 20 day EMA for the first time since mid-July '09. The 20 day EMA has turned down, and the 50 day EMA and 200 day EMA are losing their upward momentum.

The MACD has gone below the signal line and dropping rapidly. The ROC has entered the negative zone. The RSI is just above the 50% level but falling. The slow stochastic has dropped sharply from the overbought region and is about to go below the 50% level.

Bottomline? The bearishness in the Shanghai Composite index is definitely affecting the fighting spirit of the bulls at the other Asian markets. The smart money appears to be getting out. Profit booking is recommended.

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