Hong Kong: Hang Seng Index (.HSI) several developments drove optimism
Hong Kong and Chinese stocks are rallying on Monday after China revealed measures to protect and boost its economy.
Hong Kong’s Hang Seng Index (HSI) ended up 2.2%, the biggest daily percentage gain in two months.
China’s Shanghai Composite Index (SHCOMP) closed 2.1% higher, also the best daily performance since July 1.
Analysts pointed to several developments that likely drove optimism, including an announcement from the People’s Bank of China that was meant to prop up the Chinese economy. The central bank introduced a plan intended to lower borrowing costs for companies.
China plans to replace its existing benchmark lending rate with a more market-driven interest rate system, the bank said in its statement.
Chinese real estate developers surged on expectations of a boost from the easing move. Country Garden, one of China’s largest developers by sales, jumped 5.8% in Hong Kong.
The reforms “have opened up the door for potential rate cuts and should immediately offer up a [reprieve] to Chinese companies,” wrote Stephen Innes, managing partner for Valour Markets Pte in Singapore, in a research note.
“While not quite the policy bazooka the market so desperately needs … it should provide a much-needed boost to regional sentiment and global commodity prices,” he added.
Chinese stocks with ties to Shenzhen, Hong Kong’s neighboring city, also rallied. The Chinese government on Sunday announced a plan to transform Shenzhen into a global businesses hub and a technology center.
Investors might also be encouraged by the potential for improvement in US-China trade relations. US President Donald Trump said over the weekend that Apple CEO Tim Cook made a “good case” about the effects tariffs were having on the tech company’s business.
“This is significant for markets,” wrote Jingyi Pan, a market strategist for IG Group, in a research note. She pointed out that Apple is a “favorite” among big US tech stocks that would be hit hard by the latest tariffs that Trump proposed on China.
Overall, the bias in prices is: Downwards.
Note: this chart shows extraordinary price action to the downside.
By the way, prices are vulnerable to a correction towards 26,968.83.
The projected upper bound is: 27,176.08.
The projected lower bound is: 25,380.66.
The projected closing price is: 26,278.37.
A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 6 white candles and 4 black candles for a net of 2 white candles. During the past 50 bars, there have been 25 white candles and 25 black candles.
A rising window occurred (where the top of the previous shadow is below the bottom of the current shadow). This usually implies a continuation of a bullish trend. There have been 9 rising windows in the last 50 candles–this makes the current rising window even more bullish.
Three white candles occurred in the last three days. Although these candles were not big enough to create three white soldiers, the steady upward pattern is bullish.
Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.
One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 69.8545. This is not an overbought or oversold reading. The last signal was a buy 1 period(s) ago.
Relative Strength Index (RSI)
The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 41.26. This is not a topping or bottoming area. However, the RSI just crossed above 30 from a bottoming formation. This is a bullish sign. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a buy 0 period(s) ago.
Commodity Channel Index (CCI)
The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is 5. This is not a topping or bottoming area. The last signal was a buy 3 period(s) ago.
The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a sell 20 period(s) ago.
Rex Takasugi – TD Profile
HANG SENG INDEX closed up 557.619 at 26,291.840. Volume was 20% above average (neutral) and Bollinger Bands were 108% wider than normal.
Open High Low Close Volume___
Short Term: Neutral
Intermediate Term: Bearish
Long Term: Bearish
Moving Averages: 10-period 50-period 200-period
Close: 25,796.32 27,679.24 27,602.73
Volatility: 21 21 21
Volume: 1,907,725,056 1,592,764,928 1,795,211,392
Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.
HANG SENG INDEX gapped up today (bullish) on normal volume. Possibility of a Runaway Gap which usually signifies a continuation of the trend. Four types of price gaps exist – Common, Breakaway, Runaway, and Exhaustion. Gaps acts as support/resistance.
HANG SENG INDEX is currently 4.7% below its 200-period moving average and is in an downward trend. Volatility is extremely high when compared to the average volatility over the last 10 periods. There is a good possibility that volatility will decrease and prices will stabilize in the near term. Our volume indicators reflect moderate flows of volume out of .HSI (mildly bearish). Our trend forecasting oscillators are currently bearish on .HSI and have had this outlook for the last 15 periods. Our momentum oscillator has set a new 14-period high while the security price has not. This is a bullish divergence.