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Tuesday, 2 March 2010

Hang Seng. Stochastic´s overbought conditions could lead to a decline in the short term



The technical situation of Hong Kong´s main index has significantly improved in the last week, especially after the 20.500 - point level break-up. However, there are some obstacles in the short term which could prevent it from continuing its upwards movement. Fist of all, the level of 21.000 points, that was a strong support in the last quarter of 2009, should become this time a difficult resistance to be pierced for the purchasing interests. Secondly, some indicators, such as the Stochastic, which are overbought, suggest that prices could have risen too fast and too steeply in the short term. Therefore, the market sentiment could turn a little bearish. In this case, the index could look for to lean in the short-term upwards trend, around the level of 20.400- 20.500 points. The recommendation is to add long positions in case of decline and to set a stop loss in 20.100.
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