A very common phenomenon: move to park at support or resistance just prior to high impact news. This forces traders to play breakout or to fade a movement.
In this case, Hang Seng Index is now parked just above 20k which is both a psychological round number, and 20053-52-week-low set in 2015. Just in time for a potential rate hike from the FOMC tonight - this is the kind of ‘killer setup’ that some traders always get caught in because volatility could trip both bull and bear stops alike.
- Be overly bearish, jump breakdown in anticipation and end up with the worst entry should prices rebound.
- Be overly bullish with tight SL, in a real breakdown situation, stop-loss orders to trigger, wide slippage at the same time should there be a gap depending on impact of news.
- Or simply for trades on both sides of the line to be killed equally as price spikes one way and then the other.
HSI index parked at 52-week low forces traders to play breakout, or fade a move
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Soh Tiong Hum is Director of TerraSeeds Market Technician Pte Ltd. TerraSeeds is a trading educator in Singapore since 2005.
Soh's Twitter account @sohtionghum
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"I do not have a financial advisor's license. I am not qualified by any regulator to give financial advice. I do not know you the reader. Your investment means and motive may be different from me. My posts here are based on observations and meant for education. I am not responsible for for any consequence from your actions."