Friday, March 19, 2010

Stock Index Chart Patterns - Shanghai Composite, Jakarta Composite, Hang Seng - Mar 19, '10

Shanghai Composite index chart


In last week's analysis I had observed that the bears were gaining ground and expected a test of support from the 200 day EMA. The Shanghai Composite index chart dipped below the long-term moving average on the first two days of the week before recovering to move above the 20 day EMA. Once again, the bulls failed to get the index past the resistance of the falling 50 day EMA.

All the technical indicators have weakened a bit more than the previous week. The slow stochastic just about managed to move above the 50% level after dropping below it. The MACD is touching the signal line and remains in negative territory. The ROC is now in the negative zone, trying to clamber up. The RSI is at the 50% level.

The index closed 54 points higher week-on-week and stayed above the 3000 level. The question is: how much longer will the mauled bulls be able to fend off the bears?

Hang Seng index chart


The Hang Seng index chart slipped below the 21000 level on Monday and Tuesday, filling the gap formed last week. It bounced off the support from the 50 day EMA and hit a high of 21441 for the week before closing at 21371, with a modest week-on-week gain of 160 points.

The level of 21441 is almost exactly the 61.8% Fibonacci retracement level of the correction from the Jan '10 high of 22672 to the Feb '10 low of 19423.

The technical indicators are looking bullish. The slow stochastic is in the overbought zone. The MACD is rising in the positive territory and is above the signal line. The ROC is marginally positive and the RSI is moving up towards the overbought zone.

Jakarta Composite index chart


Four weeks back, the Jakarta Composite index was trying to recover from a bout of correction and looked like it wanted to correct some more. Instead, it went into a sideways consolidation just below the 2600 level.

An upward breakout from the range was accompanied by an increase in volumes as the bulls took charge. On Thursday, Mar 18 '10 the index hit a new high of 2779 accompanied by a smart increase in volumes. But it made a 'reversal day' pattern in the process (higher high but lower close) that could indicate buying exhaustion.

The slow stochastic is in the overbought zone. The MACD is rising in the positive territory and has moved way above the signal line. The ROC has dipped after touching the 200 mark. The RSI has just entered the overbought zone. However, note the negative divergences in the MACD and RSI which have failed to make new highs.

Bottomline? The chart patterns of the Shanghai Composite and Hang Seng indices are still struggling to extricate themselves from the bear's grip. The Jakarta Composite made a new high, but is looking overbought. Investors should remain on the sidelines and look for possible opportunities in beaten down sectors.

No comments: