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Hang Seng teasing 22500 Key Level – is it ready to break?
Hong Kong’s Hang Seng has appreciated nearly 16% since early May. I believe it is not done yet. At present, it approached an important key level that will determine whether the bulls for now are in play.
Hang Seng Weekly Chart
Source: Trading View prepared by Zorrays Junaid
The biggest picture is showing us that the Hang Seng is still trapped inside this multi-year consolidation.
It seems to be unfolding in a triangular shape. More specifically, in Elliott Wave terms, a wave 4 “Running Triangle”. This is where sub-wave B forms a new price extreme, which can trick traders out on thinking the instrument is appreciating. In this case, we did witness that price extreme back in late 2017 when price reached 33000 but has collapsed ever since.
According to the above chart, it appears that the Hong Kong’s index may have bottomed out on the May 10 low at 20000 and, if so, bullish continuation potential remains. My hunch is that as it is contracting in a triangle and may not reach the next high at 30000.
4 hour timeframe
Source: Trading View prepared by Zorrays Junaid
The next key level to break as the title suggests is 22500. Price is hovering around this price as of this writing. A break of that level would suggest that the Hang Seng Index is ready to advance and a form a new high within this degree.
In terms of Elliott Wave standpoint, wave ((1)) completed at 22500 back in April 2022 and then a correction up to 19380 which formed wave ((2)). Currently we are in wave ((3)). In order to solidify wave ((3)), we would need to see price form a new high above wave ((1))’s extreme at 22500.
According to the characteristic’s guidelines of the Elliott Wave theory, wave 3 conventionally tends to be the most aggressive wave.
The cherry on top is that the Hang Seng Index has broken and closed above 200 period Moving Average. The majority of last year’s price action saw the Hang Seng Index remain below this 200 period Moving Average. Therefore, a break above the Moving Average is significant.
Breaking and closing above the Moving Average whilst supported by a solid bullish wave count is a good indication that appreciation is in play within the near-term future.
Hang Seng: Future key levels to look out for
Source: Trading View prepared by Zorrays Junaid
Future key levels of consideration are an area of confluence of 50% Fibonacci Retracement level and the next resistance zone at 24750. As the next move advances, we can look to the 38.2% retracement at 23254 and then 24750 to be respected.
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