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Friday, July 23, 2010

Stock Index Chart Patterns - Shanghai Composite, Jakarta Composite, Hang Seng - Jul 23, '10

Shanghai Composite index chart


The Shanghai Composite index chart pattern is still mired in bear country, but showing signs of extricating itself with a nice pull back effort. The overhead resistance of the past 3 months from the 20 day EMA has been overcome.

The 50 day EMA stopped the rally this week. The bears may try to push the index down from here. The technical indicators suggest that the halt may be a temporary one. All four are showing positive divergences.

The slow stochastic has entered the overbought zone for the first time in more than 3 months. The MACD is above the signal line and rising in negative territory. The ROC has reached its Apr ‘10 top. The RSI is well above the 50% level.

The Shanghai Composite is still 200 points below the falling 200 day EMA. Till it crosses above the long-term moving average, the bears will technically remain in control. It looks as if the index has completed one half of a bullish rounding bottom pattern – which could lead to strong up sides if the Apr ‘10 top can be overcome.

Hang Seng index chart


The Hang Seng index chart is on much firmer footing, as it has managed to move above all the three EMAs. The pull back rally is unconvincing so far, as transaction volumes have ebbed away.

The slow stochastic and RSI are both above their 50% levels. The MACD is barely positive and just above the signal line. The ROC is in positive territory.

Despite today’s 225 points up move, the Hang Seng is 100 points below its Jun ‘10 high. A strong close above the 21000 level will be the first indication that the bulls have regained control – as a bullish pattern of higher tops and higher bottoms will get established.

Jakarta Composite index chart


One look at the Jakarta Composite index chart should be enough to convince any one that the bulls are rampaging in Indonesia and not in Spain. All three EMAs are rising with the index above them. The correction during May ‘10 gave the index the fillip needed to reach an all-time high above the 3000 level.

Both the slow stochastic and the RSI are in their overbought zones. The MACD is positive and above the signal line. The ROC is in positive territory but dipping a bit. Both the MACD and ROC are exhibiting negative divergences, which could lead to a pause in the up move.

Bottomline? The Shanghai Composite index is still looking weak, but selective buying is recommended on a cross above the 50 day EMA. The Hang Seng is doing better, and investors can start buying if the 21000 barrier is convincingly crossed. The Jakarta Composite is in a strong bull market. Buy the dips. 

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