Technical Analysis HK50 : 2018-06-21

Dmitry Lukashov IFC Markets

Weak Chinese demand bearish for HK50

Falling Hong Kong Purchasing Managers’ Index points to slowing economic growth. Will HK50 continue the decline?

Hong Kong economy’s expansion accelerated in the first quarter. Data after Q1 GDP report were positive on balance: while unemployment, retail sales and trade deficit improved in April, the inflation declined. Recent data however point to weakening demand from China: the Nikkei Hong Kong Purchasing Managers’ Index fell from 49.1 in April to 47.8 in May, the third consecutive decrease. Values below 50 indicate contraction in the private sector. Escalating US-China trade war tensions weighing on China’s economy negatively impact China’s import demand. Weaker Chinese demand is bearish for HK50.

On the daily chart the HK50: D1 has slipped to the lower bound of the wide trading range where it fluctuated in the last four months. The price is testing the support line (resistance turned into support). It has fallen below the 50-day moving average MA(50) which is turning lower too.

The Donchian channel is neutral: it is flat.
The Parabolic indicator has formed a sell signal.
The MACD indicator is below the signal line and the gap is widening, which is bearish.
The stochastic oscillator has breached into the oversold zone, this is bullish.

We believe the bearish momentum will continue after the price closes below lower boundary of Donchian channel at 29260. This level can be used as an entry point for placing a pending order to sell. The stop loss can be placed above last fractal high at 31625.50. After placing the order, the stop loss is to be moved every day to the next fractal high, following Parabolic signals. Thus, we are changing the probable profit/loss ratio to the breakeven point. If the price meets the stop loss level (31625.50) without reaching the order (29260), we recommend cancelling the order: the market has undergone internal changes which were not taken into account.

Technical Analysis Summary

Position	Sell
Sell stop	Below 29260
Stop loss	Above 31625.50

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Author

Dmitry Lukashov

IFC Markets

Dimtry Lukashov is the senior analyst of IFC Markets. He started his professional career in the financial market as a trader interested in stocks and obligations.

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