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Friday, February 26, 2010

Stock Index Chart Patterns - Shanghai Composite, Hang Seng, Taiwan TSEC - Feb 26, '10

Shanghai Composite index chart


The Shanghai Composite index chart seems to have recharged its batteries during a week-long holiday to celebrate the new year. After a brief dip below the 3000 level on Tuesday, Feb 23 '10 where it got good support from the 200 day EMA, the index moved up quickly above the falling 20day EMA.

The bears were not quite ready to let go, as the 50 day EMA provided resistance to the brief up move. As long as the index remains above the 200 day EMA the bulls will continue to fight.

The technical indicators are improving. The slow stochastic has moved above the 50% level rapidly. The RSI has edged above the 50% level, but more slowly. The ROC has entered the positive zone. The MACD is negative but has gone above the signal line.

The Chinese export juggernaut is rolling back into action but is facing an interesting problem - lack of skilled workers! Those who were laid off and sent back to their villages are probably wary of returning to their factory jobs.

Hang Seng index chart


The bulls are desperately trying to extricate themselves from the bear hug as the Hang Seng index swung back and forth between the 20400 and 20600 levels after a dip below the 200 day EMA the week before.

The slow stochastic is moving up towards the overbought zone. The ROC is positive. The MACD is negative, but above the signal line and moving up. The RSI is oscillating around the 50% level. So far, the bulls have managed to stymie a deeper correction, but the bears are in no mood to give up control.

Taiwan (TSEC) index chart


My previous look at the Taiwan (TSEC) index was 4 weeks ago. The index was under a strong bear attack but had managed to stay above the 7500 level. The bears seemed to overwhelm the bulls as the index dropped to the 7200 level on Feb 5 '10 where the 200 day EMA provided good support.

After the long new year holiday break, the bulls tried to engineer a pull back above the 7500 level that was thwarted by the 20 day EMA. By the end of the week, the TSEC ended at the same level before the holidays.

The technical indicators are looking weaker than its mainland counterparts. The slow stochastic is below the 50% level. The MACD is negative and touching the signal line. The ROC has dipped into the negative zone. The RSI has moved up to the 50% level.

Bottomline? The chart patterns of the Asian indices are still bearish and the corrective moves are not yet over. There may be a period of consolidation before a clearer trend can emerge. This is a time to be stock specific and buy very selectively.

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