Hong Kong’s ‘Rising Wedge’ May Trigger Drop

"Hong Kong’s ‘Rising Wedge’ May Trigger Drop | AboutHK.Com - More Information About HK"

Bloomberg The emergence of a “rising wedge pattern” may trigger a decline of up to 4 percent for the Hang Seng Index, according to technical analysis by CIMB Group Holdings Ltd. A rising wedge pattern refers to a trading range on a chart that begins wide at the bottom and contracts as prices move higher. The Hong Kong benchmark index has been climbing in that pattern since August when the gauge dropped 4 percent after rallying 81 percent since the March low, according to data compiled by Bloomberg. The Hang Seng Index lost 0.5 percent to 22,210.52 in Hong Kong yesterday. Speculation the global economy is recovering has driven the measure up by 96 percent in the past seven months. “The rising wedge provides a warning that the bull run is ending,” said Nigel Foo, regional technical analyst at CIMB in Kuala Lumpur said in a telephone interview. “Momentum has been slowing and volumes are kind of light.” Average daily turnover in Hong Kong has fallen from the 2009 peak of HK$146.7 billion ($18.9 billion) on May 13 to HK$69.6 billion yesterday, according to data tracked by Bloomberg. The Hang Seng Index may fall to about 21,300, Foo said. That represents the 50 percent Fibonacci level from the gauge’s peak of 31,897 in November 2007 and the bottom of 10,676 seen in October last year. In technical analysis, a Fibonacci retracement is created by taking two extreme points on a stock chart and dividing the vertical distance by the key Fibonacci ratios of 23.6 percent, 38.2 percent, 50 percent, 61.8 percent and 100 percent, according to Investopedia.com. Once these levels are identified, horizontal lines are drawn and used to identify possible resistance and support levels. To contact the reporter on this story: Jonathan Burgos in Singapore at jburgos4@bloomberg.net This e-mail address is being protected from spambots. You need JavaScript enabled to view it .