Bearish Hang Seng

I choose to watch Hang Seng closely because it has developed a multiple heads reversal pattern. Since I always believe that the major trend of all major world bourses must be the same ultimately, if Hang Seng is heading for a big C, Dow, Singapore STI and Malaysian Indices must be heading for the same direction.

Hang Seng dropped 380 points (1.8%) today. 300 to 500 points up and down for Hang Seng were rather common lately, but the 380 points drop today is significant because it happened after it has rebounded to touch its neckline of its multiple heads formation.

Dow has dropped 178 points (1.7%) after 90 minutes of trading. If Dow closed Thursday session with a sharp drop, Hang Seng is likely to trade lower tomorrow (Friday) and if Hang Seng goes lower than its 20,000 level, the most likely wave count for Hang Seng is as shown above, it is forming its sub-wave iii of wave 3. If its movement is sharp and is with high volume, showing the typical characteristics of sub-wave iii of wave 3, the likelihood of Hang Seng heading for its big C is of higher probability. Be careful. The magnitude of its current sub-wave iii may be able to give some hints whether Hang Seng is forming (I)-(II)-(III)-(IV)-(V) or A-B-C. If its sub-wave iii is shorter than sub-wave i, (I)-(II)-(III)-(IV)-(V) is more likely. But if sub-wave iii is the extended wave then A-B-C is of a higher possibility. Nothing is absolute in stocks, it is all about probability.