The CHI50 index gained positive momentum after touching a one-month low of 11367, on August 11, moving back towards the two-year high of 12027 posted on August 2. The bias is bullish but with a risk to the downside, as indicated by the RSI moving into the overbought area.
The technical indicators paint a bullish picture as both the RSI and the MACD are trending above their neutral zones, while the index itself has today crossed above the Ichimoku cloud. However, the fact that the RSI has entered overbought territory, hints to a potential reversal in the current trend. Moreover, the recent bearish cross between the 50- and the 200-period moving averages could signal that there is risk to the downside.
Should the price continue increasing, the area around 78.6% Fibonacci level at 11886 of the downleg from 12027 to 11367 (August 2- 11) is likely to provide resistance to upside movements, before the two-year high of 12027 comes back into view as an additional barrier.
Alternatively, if the price declines, immediate support is likely to be found at 11697, which is the 50% Fibonacci and the top of the Ichimoku cloud. From here, further downfalls would meet the 38.2% Fibonacci point of 11619, whilst steeper falls would shift focus towards the 23.6% Fibonacci of 11522. In case the index breaks below the swing low of 11367, a resumption of the previous downleg would take place.
