Hang Seng Index- How high can it jump?

I have noted that the Hang Seng Index ('HSI') is likely to benefit from the expected flow of funds from China ( go here). Nevertheless, I am still quite dazed by the sharp run-up in Hong Kong stock market in the past 3 weeks. How high can this rally go?

When HSI broke above its strong horizontal resistance of 21,000 in June, it went to a high of 23,500- traveling a distance of 2,500 points. That's the distance traveled by the HSI when it corrected in February. If we apply the points lost in the August correction (about 4,200 points) to the recent breakout level of 23,600, the target of the current rally would be about 27,800. That's about 1,300 from yesterday's closing level of 26,495.

All these are just fanciful guesstimates. The HSI has gone up very sharply and in the face of an possible correction in China, I believe that one has to be very careful trading in Hong Kong stocks or index or the CWs of Hong Kong stocks or index. The time is probably ripe to take some chips off the table.



Chart: HSI's daily chart as at September 24 (courtesy of Yahoo Finance)