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Technical Analysis HK50 : 2016-11-30

Positive economic data supports prices

Chinese CSI300 stock market index hit a fresh 11-month high on weaker yuan and relatively low global commodity prices. Strong economic data were additional positive. Will stock index of Hong Kong Hang Seng advance?

The main difference between these two indices is that Shanghai Shenzhen CSI 300 is calculated in yuan while Hang Seng in HK dollars. Since the start of 2016 yuan fell around 5% against the HK dollar. At the same time, CSI300 dropped 4.5% while Hang Seng advanced 3.7% within the same period. Without including exchange rate, they show quite similar fluctuations. Chinese stocks are advancing as total earnings of manufacturing sector soared 9.8% in October this year and 8.6% in 10 months compared to the same period of previous year. Previously, trade surplus and manufacturing PMI rose in China in October. The November reading of index will come out on December 1st while external trade data – on December 8th. The data may affect the Chinese stock markets.

HK50

On the daily chart HK50: D1 is in rising channel. It corrected down to its support line and 2nd Gann line but failed to break down through it and is struggling for growth. Further price increase is possible in case of positive economic data and corporate news.

  • Parabolic gives bullish signal.
  • Bollinger bands have narrowed which means low volatility.
  • RSI has surpassed the level of 50 but is far from the overbought zone, no divergence.
  • MACD gives bullish signal.

The bullish momentum may develop in case HK50 surpasses the three last fractal highs and upper Bollinger band at 23300. This level may serve the point of entry. The initial stop-loss may be placed below the support of the rising trend and 2nd Gann line, last fractal low, Parabolic signal and the lower Bollinger band at 22000. Having opened the pending order we shall move the stop to the next fractal low following the Parabolic and Bollinger signals. Thus, we are changing the probable profit/loss ratio to the breakeven point. The most risk-averse traders may switch to the 4-hour chart after the trade and place there a stop-loss moving it in the direction of the trade. If the price meets the stop-loss level at 22000 without reaching the order at 23300, we recommend cancelling the position: the market sustains internal changes which were not taken into account.

Summary of technical analysis

PositionBuy
Buy stopabove 23300
Stop lossbelow 22000

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