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Hugo in HTO Trading,

Hang Seng: Approaching 2013 low

As fears grew about the Chinese government’s ability to control the slowdown, a stock market sell-off ensued. China’s “Black Monday” saw one trillion dollars wiped off global bourses in a day. China’s increasing economic uncertainties are painful signals of the end of an economic bonanza which benefited most of the countries in the region for the last 15 years.

Recent events suggest the Chinese economy could be more fragile than previously thought. In June, a stock market rally that saw China’s benchmark index double since the end of 2014 came to an abrupt end after Chinese authorities tried to curb investors from buying stocks with borrowed cash. But sentiment has improved amid an interest rate cut in China and upgraded Q2 growth in the US. China’s Shanghai Composite Index rose again and the price of a barrel of crude oil has now picked up.

Since the beginning of the year the Hang Seng surged more than 9.5% and is in a bearish phase since 24th of August. Last week the Index went back and forward on a choppy action and closed in the red just below the open of the week, creating a doji pattern. Stochastic is showing an oversold market but even with the Index well into oversold territory, we should not fight the strong downward trend just yet.

Expecting an upward move to a weekly resistance at 22,491 on a bounce from a weekly support at 20,720 (scenario 1).

HKInd is a CFD written over Hang Seng futures.