Starting from 5 May 2008, Hang Seng Index (HSI) continued the downtrend move that began from 30 Oct 2007 which topped at 31,958.41 and closed at 30,468.33 downed by 1,490.08 points (-4.66%) on the week ended on Nov 2. The amazing thing is that the high on 30 Oct 2007 was right on the Gann fan line drawn from the peak on the week ended on 8 Aug 1997 which is about 10 years ago. Again chart analysis proves that it has been a reliable forecasting tool.
On the 5 May 2008, HSI has peaked at 26,387.36 which was the 50% retracement from the previous downtrend move. For the week ended on 13 June and 20 June 2008, HSI has been down by about 3,640 points from the peak of the correction rally, found a temporary support level which was the 61.8% Fibonacci retracement line and Gann fan line. What is the coming outlook for HSI? In short answer, bearish. The downtrend move has not been completed yet. Not so soon. If there is any rally up, we should look at it as a correction rally to sell and not to buy. Could the HSI rally up from here to form a zig-zag correction pattern? It could be.
You see by now that we are analyzing the what-if scenarios to determine what we should do if the market moves this way and that way. We can’t dictate how the market should moves. Any new information will have the market respond accordingly with discounting mechanism. However as said before in the Basic Principles of Technical Analysis, the market do have a structure in place and in my opinion the downtrend structure have not completed yet. To really confirm that the downtrend was in place, the low of 20,500 points in mid March 2008 must be taken out by the bear. Only then we have the lower low and lower high for this round of move.
At this moment of writing this post, HSI have been downed by more than 250 points and therefore have taken out the temporary support mentioned above. Therefore we should be looking at continuation of the downtrend as the bear is strong. Add short position for more profits.
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