Friday, April 2, 2010

Stock Index Chart Patterns - Shanghai Composite, Singapore Straits Times, Hang Seng - Apr 2, '10

Shanghai Composite index chart


The chart pattern of the Shanghai Composite index managed to extricate itself from the bear shackles with a gap-up opening on Monday that took it above both the 20 day EMA and the top made in Mar '10. The index closed all 5 days above the 3100 level. Finally, the bull rally in the global indices seemed to have a positive effect on the Chinese index.

The 20 day EMA has moved up to touch the flattened 50 day EMA, and should move above it next week. The 50 day and 200 day EMAs are also expected to resume their upward moves. The previous tops made in Jan '10, Dec '09 and Nov '09 will be the barriers to the up move.

The technical indicators are signalling a continuation of this week's rally. The slow stochastic has edged into the overbought zone. The MACD is above the signal line and has turned positive after almost 3 months. The ROC has firmly moved back into positive territory. The RSI is above the 50% level, but showing negative divergence.

Hang Seng index chart


The chart pattern of the Hang Seng index took bullish cues from its mainland counterpart and the positive signal from the RSI indicator last week. Two days in a row, the index went past the crucial 21441 level (the 61.8% Fibonacci retracement of the entire bear market fall) but fell back to close lower.

On All Fool's Day, the inevitable happened. The Hang Seng touched 21547 but closed only 10 points below, and almost 500 points higher on a week-on-week basis. It was the highest close for the index since the middle of Jan '10. Note that the highest volume of the week was on Wednesday, which was a down day.

The 20 day EMA has just crossed above the 50 day EMA. The slow stochastic is about to enter the overbought zone. The MACD is positive and a bit above the signal line. The ROC has managed to enter the positive zone. The RSI is showing negative divergence by dropping back onto the 50% level. The bears obviously don't want to give up that easily.

Straits Times (Singapore) index chart

Straits Times_Apr0210

Four week's back, the Singapore Straits Times index chart was moving sideways in a very tight trading range below the 2800 level - unable to decide which way to go. The following week, it broke out above the 2800 level and went on to test the Jan '10 high of 2947.

Despite a few attempts, including one on Apr 1 '10 when the intra-day high was 2946, the index has failed to clear the previous top. It may be a matter of time before it does so. But the technical indicators are beginning to show some weakness - leaving the door open for a bearish double-top pattern.

All three EMAs are moving up with the index above them. The slow stochastic is at the edge of the overbought zone after dropping down briefly. The MACD is positive but beginning to slip down and just touching the signal line. The ROC is in positive territory after bouncing off the '0' line. But the RSI is a concern, falling from inside the overbought zone down to the 50% level.

Bottomline? The chart patterns of the Asian indices are beginning to look a bit more bullish. But don't expect the bears to just keel over. Buy very selectively with strict stop-losses.

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