We believe that Hang Seng has probably made an intermediate term bottom and a new cycle has begun within a longer term uptrend. On a longer term basis, Hang Seng is still on an uptrend as no clear signal of top occurred so far (chart 2 & 3).
Hang Seng may have bottomed in late Dec and the next cycle is probably up on several reasons:
1) Sep to Dec bottom was 75 days, which is not too far from prior cycles of 70 and 68;
2) Price is still above the medium term uptrend (chart 2) and still above 20 week moving average (chart 3);
3) Price cannot close below 23000 support convincingly on weekly basis;
4) Price cannot fall further after breaking below 23000 with 2 long black candles on 15 Dec; and
5) Two dragonfly dojis a week apart with 22300 as bottom.
If so, price should continue to move higher and must close above 23700, which kept price low in the past month and a half. Next target would be Nov high of 25000. However, expect selling to continue should price close below 22300.
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