Technical analysis of these 3 regional stock indices very bearish
When monthly price charts of the three regional stock market indices namely Nikkei 225, Hang Seng Index and Straits Times Index are put together, there are common elements:
- The height of these stock market indices were printed in 2007 so they did not recover from the great financial crisis that is associated with the US sub-prime, collapse of Lehman Brothers and the AIG bailout.
- Until all three indices beat their own 2007 high, they are all retracing the 2008 – 2009 down trend.
- Red line in each chart shows a major Fibonacci retracement ratio that each stock index has retraced to but not able to beat.
Nikkei 225 (N225) pin bar at 76.4 fibonacci retracement ratio
- Although the 76.4% retracement is the first attempt for the Nikkei 225, that pin bar printed by the end of May shows scarily the very bearish price action.
- The longer the tail, the stronger the sentiment that price action is conveying.
- It may be said that a pin bar is a very significant reversal candlestick pattern. With confluence at this fib-retracement ratio, price certainly appears to achieve climax in May.
- Blow-off top
Hang Seng Index (HSI) re-tests 61.8% fibonacci retracement ratio
- Hang Seng Index does not retrace as much as Nikkei 225 but what is prominent – this 61.8% Fib-R ratio was visited at least one other time back between 2010 – 2011.
- The resistance of this 23700 level must be quite strong since price hovered at this level for as long as 7 months back early 2011. The longer the duration, the more significant the resistance. (See ‘Significant support and resistance levels are stronger: USDJPY case study‘)
Straits Times Index pin bar, bull trap, 76.4% Fibonacci ratio
- Straits Times Index does a bull trap at the 76.4 Fib ratio.
- Back late-2010, there was a near test.
- Price candle is a pin bar albeit short tail.
- But with confluence and when printed on monthly chart, a short-tailed pin bar should still have plenty of significance.
- Wash N Rinse.
Maybe market psychology is saying: Sell in May and go away.
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Soh Tiong Hum is Director of TerraSeeds Market Technician Pte Ltd. TerraSeeds is a trading educator in Singapore since 2005.
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