Hang Seng: Elliott Wave Forecasting

The Hang Seng Index is a freefloat-adjusted market capitalization-weighted stock market index in Hong Kong. It is used to record and monitor daily changes of the largest companies of the Hong Kong stock market and is the main indicator of the overall market performance in Hong Kong. These 48 constituent companies represent about 60% of capitalisation of the Hong Kong Stock Exchange.

HSI was started on November 24, 1969, and is currently compiled and maintained by Hang Seng Indexes Company Limited, which is a wholly owned subsidiary of Hang Seng Bank, one of the largest banks registered and listed in Hong Kong in terms of market capitalisation. It is responsible for compiling, publishing and managing the Hang Seng Index and a range of other stock indexes, such as Hang Seng China Enterprises Index, Hang Seng China AH Index Series, Hang Seng China H-Financials Index, Hang Seng Composite Index Series, Hang Seng China A Industry Top Index, Hang Seng Corporate Sustainability Index Seriesand Hang Seng Total Return Index Series. Hang Seng in turn, despite being a public company, is held in majority by British financial firm HSBC.

Using Elliott wave analysis we came to the conclusion that this index is going to underperform in coming months which can drag this index till its previous pivot low. Failure to protect this low will further infuse selling pressure.

The index is quoting above the extended upward sloping lower trendline which has been providing support to this index from October 2011. Till now this support has been intact but sooner or later it may breach this support zone. We can also observe that, prices faced the resistance near 61.8% retracement of the previous down move (24,111-21,197). Now the next support is its previous pivot low which is around 21,200 levels.

As per the Elliott wave theory, after completing wave v at 23,944 in February 2013, prices are then moving in a corrective pattern. Where wave….was completed at 19,426 followed by wave… in double correction at 24,111. Currently it is moving in the last of one higher degree which can move till 21,200 levels. If it breaks 21,200 then prices will drag further till 19,600 levels.

In short, our bias for Hang Seng is firmly negative as this index can move down till 21,200 followed by 19600 levels over short term.


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