Fundamental Overview
The PBoC tonight surprised with rate cuts across many key benchmarks. It’s no secret that rate cuts are generally positive for stocks, but the question will be if it’s going to be enough for a sustained rally after the big correction from the cycle high set on May 20th.
The recent PBoC policy framework reform suggests that the Chinese officials could take more actions to spur growth. So, the question should be if it’s enough to take some risk with a possibly high reward.
Hang Seng Index Technical Analysis – Daily Timeframe
On the daily chart, we can see that the price bounced from a key support zone around the 17300 level where we had the confluence of the previous swing high, the major trendline and the 61.8% Fibonacci retracement level.
That’s where the buyers stepped in with a defined risk below the trendline to position for a rally into a new cycle high. The sellers, on the other hand, will want to see the price reversing and breaking through the trendline to increase the bearish bets into the 16000 level next.
Hang Seng Index Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the bearish momentum seemed to be waning as the lower lows became shallower. The bounce got the support not only from the technical levels but also from the PBoC catalyst. The next target could be the 18300 level where we can also find the 38.2% Fibonacci retracement level of the entire correction lower.
That’s where we can expect the sellers to step in with a defined risk above the level to position for a drop back into the trendline looking for a breakout. The buyers, on the other hand, will want to see the price breaking higher to increase the bullish bets into a new cycle high.
Hang Seng Index Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the price broke through the downward minor trendline today. This might see more buyers piling in and increasing the bullish momentum, although there’s still a resistance zone around the 17700 level. The sellers might want to wait for a break below the major trendline or a rally into the 18300 resistance before increasing the bearish bets.
Upcoming Catalysts
This week is pretty empty on the data front. We begin on Wednesday with the release of the US Flash PMIs. On Thursday, we will get the latest US Jobless Claims figures. Finally, on Friday we conclude the week with the US PCE report.
