Friday, March 12, 2010

Stock Index Chart Patterns - Shanghai Composite, Hang Seng, Korea KOSPI - Mar 12, '10

Shanghai Composite index chart


Another weak weekly effort by the bulls at the Shanghai Composite index failed to produce any conclusive result in the continuing battle with the bears.

A sideways move within the narrow range of the falling 50 day EMA and the flat 20 day EMA ended with a lower week-on-week close today below the 20 day EMA, and a test of support from the 200 day EMA.

The technical indicators show that the bears are gradually regaining ground. The slow stochastic has dropped below the overbought zone and is falling. The MACD didn't quite make it to the positive territory and is touching the signal line. The ROC is barely positive. The RSI is dropping to the 50% level.

Watch out for support from the 200 day EMA. If the bulls aren't careful, the Feb '10 low of 2890 could get broken. That'll form a bearish lower-top-lower-bottom chart pattern.

Hang Seng index chart


The bulls seem to be in much better shape at the Hang Seng index as the entire week's trading was above the 50 day EMA and the psychological 21000 level. The 20 day EMA has moved up to touch the 50 day EMA.

But looks can be deceptive. Note that the the week's trading started with a gap which remained unfilled, forming an 'island' and leaving the door open for a bearish 'island reversal' chart pattern. A positive spin to that is Thursday's partial filling of the gap, which is bullish. Investors should be prepared for both possibilities.

The volumes dropped off during the week which isn't too promising for the bulls. The slow stochastic is overbought. The MACD is rising in the positive territory. But the ROC has dipped towards the '0' line. The RSI is above the 50% level but indicating negative divergence.

The Hang Seng index chart pattern is interestingly poised with the bulls winning on points during this week's fight.

KOSPI (Korea) index chart


Four week's back, the Korea KOSPI index chart had bounced off the 200 day EMA and was facing some resistance from the falling 20 day EMA and the 1600 level.

The bulls seem to have regained control with a vengeance as evinced by the higher volumes during the week's trading. The 20 day EMA has moved up and merged with the 50 day EMA.

The slow stochastic is in the overbought zone. The MACD is in positive territory and rising above the signal line. The ROC has dipped down towards the '0' line. The RSI has also dropped towards the 50% level.

Like in the Hang Seng index chart, the KOSPI chart may be developing a possible bearish 'island reversal' pattern that could end the bull recovery.

Bottomline? The Shanghai Composite index chart pattern is looking weak. The Hang Seng and KOSPI charts indicate more bullishness, but there are a few bearish concerns. At times like these - with no clear trend discernible - investor patience and resolve is tested. Curb the urge to 'do something'.

No comments: