JPositive Chinese economic data today could fuel a potential further rally in Chinese equities, typically in the Hang Seng Index. China’s manufacturing PMI for June came in at 50.2 from 49.6 the previous month, while the services PMI was recorded at 54.7 from 47.8 in May. Chinese factory activity expanded for the first time in four months after Shanghai emerged from lockdowns. This is certainly encouraging data for general sentiment, with major Chinese indices outperforming Asian equity markets. From a technical perspective, the Hong Kong benchmark may continue its bullish trend in July.
Hong Kong 50 – liquid, daily, NG (Valid 1 month)(Click to see enlarged table)
Pattern recognition– The index has been in the range movement in the ascending channel since the beginning of May and could continue its upward trend over the coming month. Imminent support is the lower band of the ascending channel, price at 21,555and medium support is near the 50-day MA at 20,834, confluence with Fib2. 38.20% retracement. An ascending triangle pattern has come into play from the March low, with pivot resistance at the band above 22,631, also confluent with the peaks observed on April 1 and June 28 respectively. Authorization of RS to 22,631 will take the index to test the average RS at 23,756 (Fib1. 50.00%), then 25,000 (Fib1. 61.80%).
Oscillator indication – The MACD, RSI, and Stochastic are all trending up with the MACD crossing above the zero line, confirming the establishment of the upward trend in the price movement.
However, a break down at the MT RS of 20,834 could cause the index to test the previous low at 19,883 seen on May 12th.
Fib1. – The Fibonacci retracement connects from the high on June 25, 2021 and from the low on March 15, 2020.
Fib2. – The Fibonacci retracement connects from the low on March 15 and from the high on April 4, 2020.
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