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Technical Analysis HK50 : 2020-02-13

Recommendation for Hang Seng Index:

Strong SellSellNeutralBuyStrong Buy

Above 27915.8

Buy Stop

Below 27075.5

Stop Loss

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Senior Analytical Expert
Articles 1591
RSI Neutral
Donchian Channel Neutral
MA(200) Buy
Fractals Neutral
Parabolic SAR Buy

Chart Analysis

IFC Markets Tech Analysis

On the daily timeframe HK50: D1 has risen above 200-day moving average MA(200) after rebounding. We believe the bullish momentum will continue after the price breaches above the upper Donchian boundary at 27915.80. This level can be used as an entry point for placing a pending order to buy. The stop loss can be placed below 27075.50. After placing the pending order the stop loss is to be moved every day to the next fractal low, following Parabolic signals. Thus, we are changing the expected profit/loss ratio to the breakeven point. If the price meets the stop-loss level (27075.50) without reaching the order (27915.80) we recommend cancelling the order: the market sustains internal changes which were not taken into account.

Fundamental Analysis

Hong Kong’s cash reserves and PMI improved more than forecast. Will the HK50 increase continue?

Hong Kong’s economic data in the last week were better than expected: private sector contraction was slower than expected in January, and foreign reserves rose more than expected. While the January reading of purchasing managers index was below 50 again, indicating contraction in the private sector, it was higher than expected: 46.8 instead of 45.2. Though indicating contraction again, the positive factor was the reading was higher than the value of 42.1 registered for the previous month, meaning a slowing of contraction in private sector activities. Another positive development was increase in foreign reserves to $445.9 billion from $441.3 billion. Improving data are bullish for HK50. The positive readings are welcome change after GDP advance report indicating economy contraction speeded up in the fourth quarter of 2019. And following the disappointing GDP report was the December retail sales report, indicating sales continued to fall albeit at slightly slower rate: 21% over year after 25.5% in November. Further deterioration of Hong Kong economic performance is a downside risk.

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