ASX 200, HSI 50, Nikkei 225, APAC Indexes Talking Points:
- ASX 200 sliced through 12-week uptrend after RSI dipped ahead of entering overbought territory
- Nikkei 225 falls just shy of erasing yearly losses, moving average support beckons
- Hang Seng Index (HSI 50) reverses at yearly downtrend. Is this the start of a further decline?
ASX 200 Daily Price Chart
Source – Trading View
A significant bearish reaction at the key 61.8% Fibonacci retracement (6,124), of the yearly range, catapulted the ASX 200 through the 12-week uptrend from the March low (4,387), as the RSI dipped just prior to registering its first overbought readings since early-January.
The 2009 trend resistance zone looks to be a formidable obstacle for buyers as the convergence of key technical indicators may continue to exert downside pressure on the Australian benchmark.
The exponential increase in volume confirms the Bearish Engulfing candle on June 11 and may signal an impending reversal, as the momentum indicator bounces away from yearly resistance and the RSI snaps its 3-month trend.
A daily close below the 50-MA (5,710) could carve a path back to the May low (5,166) and signal a resumption of the primary downtrend.
Nikkei 225 Daily Price Chart
Source – Trading View
The Nikkei 225 has outperformed the majority of its major counterparts, as the Japanese benchmark came points away from erasing the yearly losses caused by the COVID-19 pandemic.
Surging as much as 52% from the fresh 4-year lows set in March (15,338) prices climbed back above the 2009 uptrend, as the Relative Strength Index (RSI) burst into overbought territory for the first time since November 2019.
However, the RSI dipping back below 70 energized sellers, as the Nikkei sliced easily through the uptrend from the March lows before finding support at the March high (21,731).
As the momentum indicator fades from its most extreme readings since April, there may be potential for a sustained correction should price breach supportive convergence at the 200-MA (21,350)and lower bound of the 2009 uptrend (21,200).
A daily close below the 50-MA (21,100) and 61.8% Fibonacci (20,795) could see price slide back to the 50% Fibonacci (19,753) of the yearly range with the May low (19,080) the next key region of interest.
Hang Seng Index Daily Price Chart
Source – Trading View
The Hong Kong benchmark kicked off June in explosive fashion, gapping 2.5% higher on the first day of trade for the month, before surging to the 50% Fibonacci retracement (25,157) of the yearly range.
Climbing as much as 20% from the March low (21,139), price seemed destined to push back to the 200-day moving average (25,683) with market participant focus fixed on the March 6 breakaway gap and its convergence with the 61.8% Fibonacci (26,105).
However, the 2014 high (25,363) proved to be a step too far for the HSI with price collapsing back through the 50-MA (24,271) as the Relative Strength Index (RSI) sharply reversed just shy of overbought territory.
With the momentum indicator suggesting that the recent rally may be running out of steam, a pull-back to the June low (23,540) could be on the cards with the uptrend from the yearly low and 23.6% Fibonacci (23,035) providing the last line of defence for price.
Price may look to re-visit the yearly low (21,139) should the 12-week uptrend fail to hold, with a close below the psychologically imposing 23,000-handle possibly invigorating sellers and leading to a resumption of the primary downtrend.
-- Written by Daniel Moss
Follow me on Twitter @DanielGMoss
