Hang Seng Index Technical Outlook: Upward Momentum Intact

Hang Seng Index, Hong Kong Equities, HSI – Technical Outlook:

• Upward momentum in the Hang Seng Index is intact.
• The index is nearing a crucial ceiling that could define the price action in coming weeks.
• What are the key levels to watch?

HANG SENG INDEX TECHNICAL OUTLOOK – BULLISH

The upward momentum continues to be strong in the Hang Seng Index (HSI) as it approaches a crucial resistance area that could define the price action in the coming weeks.

HSI is up sharply by 47% from the October low of 14597, negatingscenario 1 highlighted in November. Instead, the Hong Kong benchmark index has been guided by a rising channel since October. The lower edge of the channel is an uptrend line from early Q4-2022 (now at about 19920), while the upper edge of the channel is another uptrend line from November (now around 22410).

Hang Seng Index 240-minutes Chart

Chart Created Using TradingView

The index has achieved the price objective of a reverse head & shoulders pattern triggered last month –scenario 2- the break mid-December above resistance at 18415 triggered the bullish pattern (the left shoulder is the early-October low, the head is the end-October low, and the right shoulder is the November 22 low), opening the way toward 21800, the target of the pattern.

Hang Seng Index Daily Chart

Chart Created Using TradingView

While there is no sign of a reversal of the uptrend yet, the Hang Seng Index is approaching a crucial ceiling that could pose a constraint for further gains. The resistance includes the March 2020 low of 21140, the mid-2022 high of 22450, roughly around the top end of the rising channel from October, and the 200-month moving average (see monthly chart). To be fair, a strong resistance area wouldn’t necessarily imply a reversal of the uptrend unless accompanied by a support break.

Hang Seng Index Monthly Chart

Chart Created Using TradingView

In this regard, the mid-December high of 19927 is an immediate cushion. Any break below would indicate that the upward pressure had faded temporarily. Any break below subsequent support at the December 20 low of 18885 would raise the odds of a deeper setback, and most likely a short-term top. For now, though, the short-term trend remains up.

— Written by Manish Jaradi, Strategist for DailyFX.com