The HK market’s 6 month daily chart shows that the Chinese plan to infuse the market with $568 billion fiscal stimulus package aimed at railways and airports sparked a huge rally (20-50% gains for the stocks related to cement, railways and infrastructure!). On Monday, the market opened at 15,033, made a high of 15,147.96 and was sold down by profit takers to 14,453. It then rallied from the lows to close at 14744.63, 3.52% higher than last Friday.

While I do believe that the bear market rally may finally break out from the 32 day moving average at 15,200, it is more prudent to wait for a pullback before entering again. Those who bought stocks days or weeks ago are better off selling half or 100% of their positions as an inevitable pullback may occur. However, I’m no fortune teller or clairvoyant. A huge rally in the US (coming from the China stimulus package that was factored in by the Asian markets) may still spur more rallies which should be a buy signal for “micro-momentum” traders.

Recommendation: Hesitate from entering at high levels, wait for the pullback instead.

Resistance: 17,000