Technical Analysis HK50 : 2018-12-07

[IFC Markets]

Negative Hong Kong data bearish for HK50
Activities in Hong Kong’s private sector continued to slow in November. Will the HK50 continue declining?

Latest Hong Kong economic data were negative: private sector activity slowed still more in November. Nikkei Hong Kong PMI dropped to 47.1 in November from 48.6 in the previous month, the seventh straight month of contraction in private sector activity. The slowing of activities is explained by deteriorating US-China trade relations: exports to China fell at the fastest pace in three years. And it is not clear how the trade negotiations will progress in the 90-day truce period that the two countries agreed to. Weaker economic data are bearish for HK50.

On the daily timeframe the HK50: D1 is falling toward the resistance line it had breached.

• The Donchian channel indicates no trend yet: it is flat.
• The MACD indicator gives a bearish signal: it is above the signal line and the gap is narrowing.
• The Stochastic oscillator is falling but has not breached into oversold zone.

We believe the bearish momentum will continue after the price breaches below the resistance line turned into support and lower boundary of Donchian channel at 25788.50. This level can be used as an entry point for placing a pending order to sell. The stop loss can be placed above the upper Donchian channel at 27276.00. After placing the order, the stop loss is to be moved every day to the next fractal high, following Parabolic signals. Thus, we are changing the probable profit/loss ratio to the breakeven point. If the price meets the stop loss level (27276.00) without reaching the order (25788.50), we recommend cancelling the order: the market has undergone internal changes which were not taken into account.

Technical Analysis Summary
Position Sell
Sell stop Below 25788.50
Stop loss Above 27276.00