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Friday, April 9, 2010

Stock Index Chart Patterns - Shanghai Composite, Korea KOSPI, Hang Seng - Apr 9, '10

Shanghai Composite index chart


The Shanghai Composite index chart pattern continued to trade above the 3100 level, but an attempt to breach the 3200 level proved short-lived as the index only managed to touch the 3178 level intra-day on Tuesday, Apr 6 '10. The index closed the week at 3145, a 13 point drop on a weekly basis.

The bears aren't allowing the bulls to take complete charge of the market just yet. The technical indicators have weakened a bit, though they are still showing bullishness. The 20 day EMA has crossed above the 50 day EMA after spending more than 2 months below it. The 50 day and 200 day EMAs have started to move up ever so slowly.

The slow stochastic entered the overbought zone but is slipping. The MACD remains positive and above the signal line. The ROC has dropped down almost to the '0' line. The RSI almost touched the overbought zone but has dipped down.

As long as the index keeps making higher tops and bottoms, as it has done for the past two months, the bulls will be able to fend off the bears.

Hang Seng index chart


The bulls returned fully rejuvenated after a 5 days long Easter break and the Hang Seng index had a near 300 points gap-up opening on Wednesday, Apr 7 '10. Thursday saw some profit booking, but today's 340 point up move took the index firmly above the 22000 level after almost 3 months.

All three EMAs are moving up with the index above them. But the real bullish sign is the positive divergences in both the slow stochastic and the MACD indicators - both have moved higher than their Jan '10 tops even as the Hang Seng remains 450 points below its Jan '10 top.

The ROC bounced off the '0' line and has started to rise. The RSI has moved up after touching the 50% level. The bulls will have the Nov '09 high of 23100 in their sights now.

KOSPI (Korea) index chart


The KOSPI (Korea) index had a gap-up in the chart pattern when I looked at it 4 weeks ago. That had created the possibility of a bearish island reversal pattern if the gap did not get filled. The gap got almost completely filled and the bulls haven't looked back since.

Today, the KOSPI index made a new high of 1737, but closed flat on a weekly basis. The decreasing volumes indicate a bit of hesitancy by bulls after reaching new highs (much like the BSE Sensex has behaved this week).

All three EMAs are swinging up smoothly with the index above them. The slow stochastic has remained inside the overbought zone for a month. The MACD is above the signal line and rising in the positive zone. The ROC is in positive territory but moving sideways. The RSI is just below the overbought zone.

Observant readers may notice the unusual but clearly discernible cup-and-handle pattern in the slow stochastic indicator (formed during Jan-Feb '10) which was a harbinger of the strong bull rally.

Bottomline? The chart patterns of the Asian indices are looking bullish. But remember that the bull run is now 13 months old. So any buying should be done very selectively, and with strict stop-losses.

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