Friday, October 30, 2009

Stock Index Chart Patterns - Shanghai Composite, Hang Seng, Korea KOSPI - Oct 30, '09

The chart patterns of many Asian indices made their bear market lows between the last week of Oct '08 and the first week of Nov '08. A year has passed, and it would be interesting to have a look at the long-term chart patterns.

Shanghai Composite index chart


The Shanghai Composite index made its 52 week low of 1679 on Nov 4 '08. The strong bull rally propelled the index to a high of 3478 on Aug 4 '09 - a spectacular rise of 107% from the low. But the index had made a high of 6124 on Oct 16 '07. So, the 'spectacular rise' managed to retrace only 40% of the entire bear market fall.

Till the 50% Fibonacci retracement level is conquered, technically we have seen a strong bull rally in a bear market. That leaves open the possibility of the Shanghai Composite index moving down below the 200 day EMA once more.

After hitting the high of 3478, the index faced a good corrective move that thrice went down towards the long-term average, but the 200 day EMA provided strong support. Today's close was marginally below the 3000 level, which the index seems unable to surpass with conviction of late.

The slow stochastic has dipped from the overbought zone. So has the RSI. The ROC is right at the '0' level. The MACD has moved into the positive zone and is above the signal line. Bit of a mixed signal from the technical indicators. Not unusual for an index consolidating sideways.

Hang Seng index chart


The Hang Seng index made its bear market low at 10676 on Oct 27 '08. It didn't have a one-way bull rally like its mainland cousin, but made a higher low of 11345 on Mar 9 '09 before starting to rally. It made its recent high of 22620 last Friday (Oct 23 '09) - a 112% rise from the low one year back.

The rally was less sharp than the Shanghai Composite's, but the Hang Seng index managed to retrace 56% of the entire bear market fall from the high of 31958 on Oct 30 '07. Today's close of 21753 means the index is still above the 50% Fibonacci retracement level, and therefore, technically more bullish than the Shanghai Composite.

The slow stochastic and the RSI has dropped to their 50% levels. The ROC is at the '0' mark. The MACD is positive and above the signal line. Mixed signals here as well - reflecting the slowing upward momentum of the Hang Seng index. Note that the 50 day EMA has provided support during recent corrective moves, and both the 50 day and 200 day EMA are moving up with decent speed.

KOSPI (Korea) index chart


The KOSPI (Korea) index also made its low of 892 on Oct 27 '08. The rally took the index to a high of 1723 on Sep 23 '09 - a gain of 93%. The gain from the low didn't hit three figures, but the index retraced nearly 70% of the entire bear market fall from the high of 2085 made on Nov 1 '07. Technically, the KOSPI index chart pattern is the most bullish of the three.

However, the index has been in a corrective move since the Sep '09 high, and this is evident from the technical indicators. The slow stochastic and RSI are both below their 50% levels. The ROC is in negative territory. The MACD is also slightly negative.

Bottomline? The long term chart patterns of the Asian stock market indices are showing some consolidation after strong bull rallies. Wait for the corrections to play out before deciding the next move. Further corrections can't be ruled out.

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