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Friday, March 16, 2012

Stock Index Chart Patterns – Hang Seng, Taiwan TSEC, Korea KOSPI – Mar 16, ‘12

In the previous update, the index chart patterns of Hang Seng, TSEC and KOSPI were correcting after climbing above their respective 200 day EMAs. Investors were advised to buy selectively during the dips. Let us see how the charts have played out over the past three weeks.

Hang Seng index chart


The Hang Seng index corrected sharply below its 20 day EMA down to its rising 50 day EMA. The bounce up was equally sharp and the index is once again trading above all its three EMAs. The 50 day EMA has crossed above the 200 day EMA, confirming a return to a bull market.

All the technical indicators aren’t quite bullish yet, so a bit of consolidation can be expected before the up move can resume. The slow stochastic had dropped below its 50% level, but has climbed up above it. The MACD is positive, but below its falling signal line. The ROC tried to re-enter the positive zone, but failed. The RSI dropped below its 50% level and is trying to rise up.

The larger of the two gaps above the 21000 level (formed on the chart in Aug ‘11) has been filled. The smaller gap above the 22000 level needs to get filled before the bulls can resume control.

Taiwan TSEC index chart


The correction in the Taiwan TSEC index chart got good support from the rising 20 day EMA and the subsequent upward bounce has partly filled the huge gap above the 8000 level. There is another small gap at the 8500 level, which also needs to get filled before the bulls can wrest control. The imminent ‘golden cross’ of the 50 day EMA above the 200 day EMA will technically confirm a return to a bull market.

The technical indicators are mildly bullish. The slow stochastic is above its 50% level. The MACD is positive, but below its signal line. The ROC has bounced up from the ‘0’ line. The RSI is oscillating just above its 50% level. Some consolidation is likely prior to the next up move.

Korea KOSPI index chart


Despite the correction down to the 50 day EMA, the KOSPI chart recovered quickly and seems well on its way to fill the Aug ‘11 gap at the 2100 level. All three EMAs are rising and the index is trading above them. A bullish pattern of higher tops and higher bottoms and the ‘golden cross’ in Feb ‘12 are clear signs of a bull market.

The technical indicators are looking bullish. The slow stochastic is rising towards its overbought zone. The MACD is positive and touching the signal line. The ROC is moving up in positive territory. The RSI is climbing above its 50% level. Add to existing holdings.

Bottomline? Chart patterns of three Asian indices have returned to bull markets after spending a few months in bear territory. Small gaps in the charts formed in Aug ‘11 remain to be filled. The bears may put up their last stands at the gap levels, but are likely to be overwhelmed. Happy days seem to be here again.

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