Technical Analysis HK50 : 2019-03-08

Weak data bearish for HK50

Hong Kong’s economic growth slowed in Q4 2018 and private sector contraction continued in February. Will the HK50 continue declining?

Recent Hong-Kong economic data were weak: the economy shrank 0.3% over quarter in the last three months of 2018, the private sector contraction continued in February for eleventh straight month, however retail sales increased 6.9% over year in January after 0.1% growth in December and foreign exchange reserves increased from 432.1 billion Hong Kong dollars in January to 434.5 billion in February. At the same time latest Chinese data were negative: balance of trade surplus dropped to 4.12 billion dollars in February from 39.16 billion the previous month, with imports declining 5.2% year over year to 131.12 billion while exports fell 20.7% to 135.24 billion. China is Hong Kong’s biggest trading partner, and falling Chinese imports mean shrinking market for Hong Kong’s exports. Weak economic data are bearish for HK50.

HK50 testing Fibonacci 23.6 level 03/08/2019 Technical Analysis IFC Markets chart

On the daily timeframe the HK50: D1 has breached below the support line, and is testing the Fibonacci 23.6 support level.

  • The Parabolic indicator gives a sell signal.
  • The Donchian channel indicates downtrend: it is widening down.
  • The MACD indicator gives a bearish signal: it is above the signal line and the gap is narrowing.
  • The Stochastic oscillator is falling but has not breached into oversold zone yet.

We believe the bearish momentum will continue after the price breaches below the lower boundary of Donchian channel and Fibonacci 23.6 level at 28220.0. This level can be used as an entry point for placing a pending order to sell. The stop loss can be placed above the last fractal high at 29269.5. After placing the order, the stop loss is to be moved every day to the next fractal high, following Parabolic signals. Thus, we are changing the expected profit/loss ratio to the breakeven point. If the price meets the stop loss level (29269.5) without reaching the order (28220.0), we recommend cancelling the order: the market has undergone internal changes which were not taken into account.

Technical Analysis Summary

PositionSell
Sell stop Below 28220.0
Stop loss Above 29269.5

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