Regional - TECHNICALS
A temporary respite
Asian markets are set for a technical rebound.
Laurence Balanco (852) 26008576 laurence.balanco@clsa.com
As the regional benchmark (MXASJ – 459) is in a short-term oversold
position, marginally below the August 2007 low, a technical rally in the
coming weeks is likely. Targets for a recovery rally, based on a partial
retracement, extend from 501-530. The 501-516 area is particularly
attractive. If the regional benchmark rallies sharply on growing volumes and
improving breadth (only 9% of stocks in the regional benchmark sit above
their 40-week EMA) a more sustainable rally may be underway.
Gains limited to a partial retracement of losses. We view any rally that
materialises from current levels as a technical rebound that will be followed
by the resumption of downtrends in the region. Here we try and identify
resistane levels for the regions major markets:
�� China (MSCI China – 59) - The advance from the 58 low should be a
partial retracement of the decline from the May peak. Retracement
resistance is 65 (38%), 68 (50%) and 70 (62%). There is a resistance
zone at 66 formed by the mid-April low and the falling 50-day EMA.
�� Korea (Kospi – 1,537) - Resistance starts at 1,571, the January and
March lows. The index may be partially retracing the decline from the
1,901 – if so, retracement resistance is at 1,640 (38%), 1,687 (50%)
and 1,735 (62%).
�� Taiwan (TWSE – 7,075) - Initial resistance is found at 7,384, the
January low. Retracement resistance of the May-June decline is at 7,794
(38%), 8,065 (50%) and 8,346 (62%). The chart shows resistance at
7,890, the mid-March low.
�� Hong Kong (HSI – 21,821) - The uptrend from the 2004 wave 2 low
remains intact. The advance from long-term trend line support should be
a partial retracement of the decline from 26,377. Retracement resistance
is at 22,950 (38%), 23,565 (50%) and 24,196 (62%). The chart shows
gap resistance at the 23,741-24,392 area.
�� India (Nifty – 4,141) - The old support level at 4,448-4,500 now
becomes an important resistance zone. The advance from 3,848 should
be limited to a partial retracement of the fall from the May peak.
Retracement resistance starts at 4,347 (38%), 4,516 (50%) and 4,692
(62%).
�� Singapore (FSSTI – 2,896) - If we are correct and other Asian markets
rally from here it is possible that the FTSE STI will not make a new low.
The result of this would be a steady period of outperformance by
Singapore versus the regional benchmark since the March low.
Retracement resistance starts at 3,015 (38%) and ends at 3,104 (62%).
