It was a week of crazy volatility on Hong Kong Hang Seng Index (HSI) last week. Looking at the HSI chart, you can see high candle formation or gapping happening the whole last week. It was something never happened before to have HSI swing more than 1,000 points in a single day.
We saw 2 big financial giants disappearing from the world beginning of last week and therefore drive Hong Kong Hang Seng Index down. The good news came mid of the week after US government announced the bail out plan for the insurance giant AIG and followed with another big US$700 billions rescue plan. That definitely cheer the market and therefore the market rebounded in the 2nd half of the week and was able to recover almost all the loss incurred at the beginning of the week.
Now, as the US government is waiting for the congress approval to give a final go ahead on the rescue plan, where do you think the market will head to?
Let’s take a look at the Hong Kong Hang Seng chart now!
Key Lesson: Hong Kong Hang Seng Dive after A Descending Triangle Formation
I did mentioned at the end of August that Hong Kong Hang Seng was forming a descending triangle. I was also projecting a target that HSI can dive down till 15,744 level. Honestly, I was very skeptical the Hang Seng would really dive so much at that moment of time. I was also telling myself that it would be extremely scary if the Hang Seng really dive down that much.
Who knows what I have been worrying turned true last week, almost 3 weeks after seeing the descending triangle formation. I did write another post on Sep 8 that the Hang Seng broke the the support level at 21,000 and we really need to be very careful and exercise extra caution in our trading.
The end result was a big dive for the Hang Seng to dive down to a low of 16,283. Although it was still higher than my earlier prediction. This dive has been catastrophic to cause big enough damage if you are holding some long position.
My key lesson here: Learn to observe the chart formation like descending triangle will help us to spot any possible melt down of the market and we can then exercise extra cautions to reduce our risk.
Hang Seng is Facing MA Resistance Ahead
After the rally and big rebound last week, it is a great relief to see that Hang Seng has regained all the losing ground. However, another red alert appeared again on chart.
What’s that?
Hong Kong Hang Seng is facing resistance level again.
Looking at the chart, we can see that Hong Kong Hang Seng is facing resistance first by the 20d MA line which is at the 20,000 level. We have seen occurrence that HSI was resisted by this 20d MA in the recent down trend. Another more stubborn resistance will be near the 21,000 level. 21,000 was the previous classical support level and it will not turn to be resistance. On top of that 21,000 is also very to the 50d MA. A moving average resistance coupled with a classical resistance will make it a very stubborn resistance to break.
So, I will look for the price action tomorrow on Hang Seng, if Hang Seng turn down on the 20d MA, there is a high possibility that the market will resume the down trend. However, any good news can come from the US congress anytime to boost the market up again.
So, in a time of volatility, we must be extra careful and observe any possible head wind change, take care folks if you are trading on Hong Kong Hang Seng Index… 
High Volatility on Hong Kong Hang Seng Index
DISCLAIMER: This information is used for learning purposes only. It does not constitute an offer or solicitation to buy or sell. You should do your own analysis on top of my postings.
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great post hope to see some additional comments next Saturday…see ya