Is Hang Seng index in for a turnaround or is it just a dead cat bounce?

If you are eager to know what the outlook for Hang Seng index is, then, you are at the right place!   

Hong Kong’s Hang Seng index has recently become the talk of the town as it jumped 4 per cent on Friday and with this, it snapped its three weeks’ losing streak.  

Last week, Hang Seng ended with gains of 2.18 per cent above its important psychological mark of 21,000 after Chinese state media on Friday reported details of Politburo meeting, where officials assured additional policy support to meet the country’s economic growth target for the year.   

So, after Friday's robust move, if you are eager to know what the outlook for Hang Seng index is, then, you are at the right place!   

On the weekly chart, the index has formed a sizeable bullish candle along with a lower shadow thereby, indicating that buying interest is emerging at a crucial support area, which is in the form of a 62 per cent retracement of the current upmove from 18,235-22,523.   

In the coming days, it’s important to watch whether or not the index sustains above the zone of 21,177-21,215, which are the highs of the last two weeks. Sustaining above this zone would confirm follow-through buying interest and in that case, it would open gates for upmove towards the levels of 21,700. However, failure to sustain above the mentioned resistance zone would clearly indicate that this was a dead cat bounce along with the fact that traders are not comfortable in initiating buying positions at higher levels. In fact, they are using this bounce to lighten up. Meanwhile, on the downside, the zone of 20,550-20,600 is a crucial support area.