HSI dominated by bears dragging the market lower throughout the day
Hong Kong Hang Seng Index (HSI) Technical Analysis Report for May 22, 2020 | by Techniquant Editorial Team
Moving lower for the 2nd day in a row, HSI ended the week -3.64% lower at 22930.14 after tanking $1349.89 (-5.56%) today. This is the biggest single-day loss in over two years. Today's close at 22930.14 marks the lowest recorded closing price since March 24th. The bears were in full control today, moving the market lower throughout the whole session. Ending with a weak close near the low of the day sets a bearish note for the next session.
Daily Candlestick Chart (HSI as at May 22, 2020):
Friday's trading range has been $878.65 (3.7%), that's far above the last trading month's daily average range of $309.77. Weekly volatility is also higher, being way above the market's average weekly trading range. The longer-term, monthly volatility is currently slightly higher than usual for HSI.
Two candlestick patterns are matching today's price action, the Bearish Belt-hold and the Black Candle which are both known as bearish patterns.
Prices are trading close to the key technical support level at 22805.07 (S1). Hang Seng closed back below the 50-day moving average at 23870.65.
Crossing below the lower Bollinger Band for the first time since March 19th, prices have shown unusually strong downward momentum in the short-term. This could either indicate a potential selling climax after which prices might head back up towards the mean of the Bollinger Bands at 24086.37 or signal the beginning of a strong momentum breakout leading to even lower prices. The last time prices broke out below the lower Bollinger Band on March 18th, HSI lost -2.61% on the following trading day.
The trend is clearly bearish, showing an intact downtrend in the short, medium and long-term.
Further selling could move prices lower should the market test April's close-by low at 22756.13.
Among the 14 market conditions that our pattern recognition engine identified today, the statistics for the Technical Indicators based market condition "Close below the lower Bollinger Band" stand out. Though it is usually interpreted as bearish, it has actually shown to be bullish for Hang Seng. Out of 149 times, HSI closed higher 51.68% of the time on the next trading day after the market condition occurred. The optimal exit for swing trading this condition on the long side has been after 10 trading days, showing a win rate of 61.07% with an average market move of 0.55%.
With three of the other Major World Indices closing higher and three closing lower today, the winners of the day are NDX surging 0.38% and SPX gaining 0.24%. On the flipside the worst performers have been NKY closing -0.8% lower and FTSE losing -0.37%. Read more