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Friday, June 11, 2010

Stock Index Chart Patterns - Shanghai Composite, Korea KOSPI, Hang Seng - Jun 11, '10

Shanghai Composite index chart


The bar chart pattern of the Shanghai Composite index continued to languish below the falling 20 day EMA and the psychological level of 2600 through out the week.

All the three EMAs are falling with the index below them. The bears are firmly in control. But every dark cloud has a silver lining, and the bulls may try to engineer a rally next week, banking on the slight improvement in the technical indicators.

The intra-day low of 2482, touched on May 21 '10, was tested during the week but wasn't breached. The slow stochastic is below the 50% level but bounced off the oversold zone. The MACD is rising in negative territory and is above the signal line. The ROC is negative but trying to move up. The RSI is just above the 50% level.

Hang Seng index chart


The Hang Seng index chart pattern shows that the bulls took advantage of the improving technicals to mount a charge towards the 20000 level. The low volume effort was thwarted twice by the falling 20 day EMA.

A 240 points up move today (Fri. Jun 11 '10), took the index past the 20 day EMA and just short of the 20000 level. But it did manage to close above the 20 day EMA and about 100 points higher on a weekly basis.

Is this the first sign that the 2 months long correction is ending? The low volumes do not suggest that. The technical indicators have improved further, which means the pullback can continue next week.

The slow stochastic and the RSI have edged above their 50% levels. The ROC has turned positive. The MACD is above the signal line and rising in the negative zone.

KOSPI (Korea) index chart


The chart pattern of the KOSPI (Korea) index had received good support from the 200 day EMA when I looked at it a month ago, but faced resistance from the falling 20 day EMA.

The bears attacked with renewed vigour and pushed the index below the 200 day EMA to 1533 on May 25 '10 - slightly lower than the Feb '10 low of 1549. Since the fall was within the 3% whipsaw lee-way, technically a breach of the Feb '10 low wasn't confirmed.

The bulls engineered a strong pullback that faced resistance at the falling 50 day EMA. The 200 day EMA provided support to the next up move and today's close was above the 50 day EMA.

The slow stochastic has almost reached the overbought zone. The ROC is in positive territory. The RSI is at the 50% level. The MACD is above the signal line and rising in negative territory. But the low volumes raise a question mark about the sustainability of the pullback rally.

Bottomline? Both the Chinese index chart patterns are in bear markets, though the Hang Seng bulls are showing some signs of life. The Korea chart pattern has loosened a tight bear hug, but hasn't shaken off the bears yet. Investors can buy selectively where valuations look attractive.

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