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Technical Update - ASX 200, Hang Seng and China A50
Kim Cramer Larsson
Technical Analyst, Saxo Bank Group
Summary: ASX 200 uptrend is weakening and could perform a correction before it reaches resistance area
Hang Seng And China A50 have both formed top and reversal patterns strongly indicating a correction to unfold
Today's Saxo Market Call podcast.
Today's Market Quick Take from the Saxo Strategy Team
Today's Market Quick Take from the Saxo Strategy Team
ASX 200 uptrend is slowing as the Index is nearing strong resistance area around 7,592-7,625. There is minor divergence on RSI indicating a weakening of the uptrend. A correction could be seen before ASX 200 reaches the resistance area. A correction that could take ASX 200 down to around 7,300-7,250. 21 and 55 SMA’s will provide some support limiting the correction but a dip down to support at 7,167 should not be ruled out.
However, the uptrend is still intact and ASX could move higher before a correction. Divergence on RSI is just a warning of a looming trend exhaustion and reversal behaviour.
Hang Seng Index has formed an Evening Star like pattern over the past three days. A correction is likely. A test of the lower rising trendline and the support at around 21,388 should be expected. If Hang Closes below the trend line and below 21,388 a sell-off down to around 20K could be seen possibly dipping down to the 0.382 retracement at 19,605 and to the 200 daily SMA.
To cancel and reverse the reversal pattern a close above 22,700 is needed.
There is no divergence on RSI indicating Hang Sang could move higher above 22,700 after a correction. No strong resistance until around 25K
FTSE China A50 has formed an Evening Doji Star like pattern which is an indication of top and reversal. A correction is in the cards and support 13,500 could be tested. However, a dip down to the 200 daily SMA and 0.382 retracement at 13,191 should not come as a surprise.
If A50 moves higher, which RSI indicates it could, a close above 14,445 will demolish and reverse the top and reversal and correction scenario, and A50 would be set for a move to resistance at around 15K.
RSI divergence explained: When instrument price is making a new high/low but RSI values are not making new high/low at the same time. That is a sign of imbalance in the market and an weakening of the uptrend/downtrend. Divergence or imbalance in the market can go on for quite some time but not forever. It is an indication of an exhaustion of the trend
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