Friday, June 25, 2010

Stock Index Chart Patterns - Shanghai Composite, Taiwan TSEC, Hang Seng - Jun 25, '10

Shanghai Composite Index Chart
The chart pattern of the Shanghai Composite index is trying to extricate itself from a strong bear grip, but other than making a slightly higher bottom and a higher top it doesn't look very optimistic for the bulls.

The effort at an up move got thwarted by the falling 20 day EMA. All three EMAs are falling with the index below them - the sign of a bear market. Should the bulls give up and go for a vacation?
The technical indicators are not looking too negative. The slow stochastic and RSI are just below their 50% levels. The ROC is at the '0' level. The MACD is above the signal line and moving up in negative territory.  If the bulls can regroup, a little effort can take the index above the 20 day EMA.
The stock market is yet to digest the full implication of the yuan's unpegging from the dollar. But the signs of labour unrest after several years of suppression can have serious repercussions about foreign investments. The drop in the Baltic Dry index may be a sign of slow down in the voracious Chinese appetite for commodities import.

Hang Seng Index Chart
The Hong Kong index chart pattern is quite a contrast to the Shanghai Composite chart - trying to maintain their bullish position. The bears are on the back foot, but in no mood to give up without a fight.

The index is above all the three EMAs. The 20 day and 50 day EMAs have started to move up and the 20 day EMA is all set for a bullish cross above the 50 day EMA. The 200 day EMA has hardly fallen.
Note the bullish saucer-like rounding bottom patterns in the technical indicators. The slow stochastic is in the overbought zone. The RSI is about to enter its overbought zone. The MACD is above the signal line and rising in positive territory. The ROC is positive and made a higher top - a positive divergence.
But it isn't a one-way street for the bulls. The Hang Seng is well below the Apr '10 top. It also made a 'reversal day' pattern (higher high, lower close) on Thu. Jun 24 '10.

Taiwan (TSEC) Index Chart
Like the Hang Seng, the TSEC index chart is also trying to hang on to its bullish stance. Today's price action must have come as a bit of a dampener.

After managing to stay above the entangled 50 day and 200 day EMAs (and the psychological 7500 level) for four straight trading sessions, the TSEC slipped back into bear country by closing below both at 7475, which was also a lower close on a weekly basis.
The technical indicators are reflecting the recent bullishness. The slow stochastic is in the overbought zone. The RSI is above the 50% level. The MACD is above the signal line and has turned positive. The ROC is exhibiting positive divergence even as the TSEC is well below the double-top made in Apr '10.
Bottomline? The Shanghai Composite index chart pattern is still in a firm bear grip. The Hang Seng and Taiwan TSEC indices are looking more bullish, but the bears are trying to regain the upper hand. Time to wait and watch how the fight for dominance unfolds.

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