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Hong Kong: HANG SENG INDEX (.HSI) stocks firm as key Chinese rate cut again

Hong Kong: HANG SENG INDEX (.HSI) stocks firm as key Chinese rate cut again

China and Hong Kong stocks firmed on Monday as a key Chinese lending rate was cut for the second time this year to shore up the coronavirus-hit economy.

Shayne Heffernan Trade Idea

“The ‘stay-at-home economy’ is replacing the social economy. People don’t need to buy clothes or make-up. That’s what changed, and will make the polarisation [of Hong Kong stocks] more apparent.”

“You should focus on which companies will be the winners and benefit the most in the post-pandemic world. The pandemic will change people’s behaviour.” Investors should think local as the world re-evaluates the trade-offs of globalisation and countries return to making more essentials at home. Shayne Heffernan PhD in Economics

Why This Matters

After months of nail-biting bouts of volatility and panic selling driven by the coronavirus, Hong Kong’s stock market has transformed itself into a strange beast: part bull, part bear.

Investors suddenly finding themselves astride this hybrid creature are galloping into uncharted territory offering both rare opportunities and extreme hazards.

Technically, the Hong Kong market’s 50-stock Hang Seng Index tumbled down into bear territory on March 13, and continued to slide. Assuming its March low sticks, it still has considerable distance to go before entering its next official bull stage. But don’t tell that to individual stocks both on the benchmark and more broadly in the city’s equity market that are already posting great numbers.

The Hong Kong stocks now behaving like bulls have been on a spectacular run – the kind that some key analysts predict will continue in a post-coronavirus world that places a premium on the internet and the conveniences it brings.

Meanwhile, the stocks still behaving like bears are padding around in a deep hole, even though some have recently made some gains. And they face daunting new challenges in the post-coronavirus world. Think here of shares related to travel, such as airlines and hotels. Even Macau’s glitzy casinos face a long road to returning to anything like the pre-coronavirus world of shoulder to shoulder gamblers at baccarat tables with crowds of maskless rooters breathing down their necks.

Technical Indicators

Overall, the bias in prices is: Downwards.

Note: this chart shows extraordinary price action to the downside.

The projected upper bound is: 25,280.12.

The projected lower bound is: 22,316.47.

The projected closing price is: 23,798.29.

Candlesticks

A big black candle occurred. This is bearish, as prices closed significantly lower than they opened. If the candle appears when prices are “high,” it may be the first sign of a top. If it occurs when prices are confronting an overhead resistance area (e.g., a moving average, trendline, or price resistance level), the long black candle adds credibility to the resistance. Similarly, if the candle appears as prices break below a support area, the long black candle confirms the failure of the support area.
During the past 10 bars, there have been 4 white candles and 6 black candles for a net of 2 black candles. During the past 50 bars, there have been 25 white candles and 25 black candles.

Three black candles occurred in the last three days. Although these candles were not big enough to create three black crows, the steady downward pattern is bearish.

Momentum Indicators

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.

Stochastic Oscillator

One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 41.6600. This is not an overbought or oversold reading. The last signal was a sell 3 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 47.25. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a buy 18 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 17. This is not a topping or bottoming area. The last signal was a sell 1 period(s) ago.

MACD

The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a buy 16 period(s) ago.

Rex Takasugi – TD Profile

HANG SENG INDEX closed down -461.020 at 23,869.000. Volume was 72% below average (consolidating) and Bollinger Bands were 15% narrower than normal.

Open          High        Low         Close       Volume
24,247.840    24,247.840  23,860.170  23,869.000  597,729,088
Technical Outlook
Short Term:        Neutral
Intermediate Term: Bullish
Long Term:         Bearish
Moving Averages:    10-period      50-period      200-period
Close:              24,143.93      25,019.47      26,568.13
Volatility:         27             40             27
Volume:             1,766,820,608  2,532,540,672  1,813,482,368

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.

Summary

HANG SENG INDEX is currently 10.2% below its 200-period moving average and is in an upward trend. Volatility is extremely low when compared to the average volatility over the last 10 periods. There is a good possibility that there will be an increase in volatility along with sharp price fluctuations in the near future. Our volume indicators reflect volume flowing into and out of .HSI at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bullish on .HSI and have had this outlook for the last 5 periods.

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