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Analysis

HK50(HSI) continues the upside trend amid positive Chinese economic data

HKEX

Today’s Chinese positive economic data may fuel a potential further rally of the Chinese stocks, typically in the Hang Seng Index. The Chinese manufacturing PMI for June printed 50.2 vs. 49.6 the prior month, while the service PMI was recorded at 54.7 vs. 47.8 in May. China’s factory activity expanded for the first time in four-month after Shanghai came out of lockdowns. It is certainly encouraging data for the broad sentiment, with the major Chinese indices outperforming the Asian equity markets. From a technical perspective, the Hong Kong benchmark index may continue its uptrend in July.

Hong Kong 50 - cash, daily, NG (Valid for 1 month)

(Click to see the enlarged the chart)

Pattern recognition- The index has been in the ranging movement in the ascending channel since early May and may continue to trend up in the coming month. The imminent support is the lower band of the ascending channel, pricing at 21,555, and the medium-support is near the 50-day MA at 20,834, confluence with the Fib2. 38.20% retracement. An ascending triangle pattern has come into play since the low in March, with the pivotal resistance at the upper band at 22,631, also confluence with the highs seen on 1 April and 28 June respectively. Clearance of the RS at 22,631 will take the index to test the medium RS at  23, 756 (Fib1. 50.00%), then 25,000 (Fib1. 61.80%).

Oscillator indication – MACD, RSI, and Stochastic are all trending up, with MACD crossing over above zero line, which confirms an establishment of the uptrend of the price movement.

However, a bearish break out at the MT RS of 20,834 may take the index to test the previous low at 19,883 seen on 12 May.

Fib1. – The Fibonacci retracement connects from the high on 25 June 2021 and the low on 15 March 2020.

Fib2. – The Fibonacci retracement connects from the low on 15 March and the high on 4 April 2020.

 

 


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