Technical analysis: Will the HK50 rebound continue?

Recommendation for hang seng index: Sell

Sell Stop։ Below 26849.2

Stop Loss։ Above 29357.3

RSI։ Neutral

MACD։ Sell

Donchian Channel։ Sell

MA(200)։ Sell

Fractals։ Neutral

Parabolic SAR։ Sell

Chart analysis

The HK50 technical analysis of the price chart in daily timeframe shows HK50: Daily has breached below the 200-day moving average MA(200). We believe the bearish momentum will continue after the price breaches below the lower Donchian boundary at 26849.2. This level can be used as an entry point for placing a pending order to sell. The stop loss can be placed above the upper Donchian boundary at 29357.3. After placing the pending order the stop loss is to be moved every day to the next fractal high indicator, following Parabolic signals. Thus, we are changing the expected profit/loss ratio to the breakeven point. If the price meets the stop-loss level (29357.3) without reaching the order (26849.2) we recommend cancelling the order: the market sustains internal changes which were not taken into account.

Fundamental analysis

Hong Kong private sector activity expansion slowed in June. Will the HK50 rebound continue? Recent Hong Kong economic data were positive on balance but pointed to slowing growth. Trade deficit narrowed in May while retail sales growth slowed, and Hong Kong private sector activity expansion slowed in June. Thus, trade deficit declined to H$25.5 billion from H$31.2 billion in April. But retail sales grew 7.8% over year in May after 11% increase in April. And Markit reported Hong Kong PMI declined to 51.4 in June from 52.5 a month earlier. Readings above 50 indicate sector activity expansion. Both demand and output rose for the third straight month, but rates of growth softened from May when the private sector had benefitted from the further easing of COVID-19 restrictions. Meantime, foreign demand fell, including new business from China. Slowing business activity is bearish for HK50.

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