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Friday, May 14, 2010

Stock Index Chart Patterns - Shanghai Composite, Korea KOSPI, Hang Seng - May 14, '10

Shanghai Composite index chart


In last week's analysis of the Shanghai Composite index chart pattern, it was clear that the bears had taken over complete control. The last point of likely support was the Sep '09 low of 2640.

That level was breached on intra-day basis on Tuesday and Wednesday, but the index managed to close above 2640 on all 5 days of trading. That will be a small consolation for the bulls. The technical indicators are not providing much hope for them.

All the three EMAs are falling together with the index well below them. The slow stochastic and RSI are both inside their oversold zones. The MACD is negative and below the signal line, but has stopped falling. The ROC is negative but trying to move up.

The Shanghai Composite index has fallen for a month without respite. One can expect an effort at a pullback by the bulls. Any rise is likely to face resistance from the falling 20 day and 50 day EMAs, and will provide selling opportunities.

Hang Seng index chart


The Hang Seng index chart pattern remained below the 200 day EMA, but moved above the psychological 20000 level. The Feb '10 low of 19423 wasn't tested either. The bulls are not completely out of the bout yet. But their weakness is evident from the lower volumes on up days.

The technical indicators are trying to recover from an extremely bearish state. The 20 day EMA is below the falling 50 day EMA but hasn't dropped below the 200 day EMA. The slow stochastic and RSI are emerging from their oversold zones. The MACD is below the signal line, but starting to rise in negative territory. The ROC is also negative but rising.

The Hang Seng index is facing resistance from the 200 day EMA. Till it can move and stay above the longer-term moving average, bullish hopes will be belied. Shorts can be opened on a convincing break below 19423 (Feb '10 low).

KOSPI (Korea) index chart


The KOSPI Korea index chart pattern bounced up nicely after receiving support from the 200 day EMA and managed to end the week exactly on the 50 day EMA. But bulls haven't been able to garner enough buying support - volumes were lower on up days and higher on down days.

The Feb '10 lows were not tested during the short correction. The technical indicators are a lot less bearish than the two Chinese indices. The falling 20 day EMA has stayed above the 50 day EMA, which in turn is well above the 200 day EMA.

The slow stochastic has given a bullish cross below the 50% level. The RSI is also below the 50% level but heading down, which is a negative divergence. The MACD is negative and below the signal line, but has started rising. The ROC is also negative but rising.

Don't short this market as long as the support from the 200 day EMA holds.

Bottomline? The Shanghai Composite index chart has reverted back to a bear market after a prolonged rally. The Hang Seng index chart has not yet followed the Shanghai Composite into a bear market, but may do so soon. The Korea KOSPI index chart is still in a bull rally. But with outflow of FII money having started from the Chinese and Indian stock markets, Korea may not remain immune for long. Time to watch from the sidelines.

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