Hang Seng rising on positive indicators

Tensions from the Occupy Central movement has largely abated as police made headway in clearing the Mong Kok protest site and arrested top student leaders.

Hong Kong protest
Source: Bloomberg

While we did see some pockets of street clashes, the situation is now under control.

As business goes back to normal and consumer sentiment returns, this will be a positive for the markets.

Hong Kong stocks opened flat yesterday, but rallied over the day and is in line with China A shares. This saw the Hang Seng close 1.12% higher, at 24,111.98 points – breaking above the key resistance level of 24,000 points.

 

Ahead of the Hong Kong Open

Will we see Hong Kong shares hold on to their gains and stay above the 24,000 point level?

A range of indicators suggests:

 - From a technical perspective, the Hang Seng Index has broken above the 20DMA over the past week, which suggests an upside bias in the short-term.

 - Also on the daily chart, the 50DMA looks poised to cross back above the 200DMA. This will be one-to-watch as it will be a bullish indicator of momentum.

 - Another positive signal is seen from the MACD crossing above its signal line, which indicates an upward bias in the interim and a buy call.

 - Looking at the index constituents, 79% of them are above their 20DMA (vs 63% the previous session) and 77% are above their 50DMA (vs 72%).

We will be watching out for the Hang Seng, or Hong Kong HS50, to test the uptrend line formed since October.

On that basis we are calling for Hong Kong HS50 to open higher by 0.32% at 24236 points.

Hong Kong HS50 cash
Click to enlarge

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