Technical Analysis: Hong Kong market outlook – Is the rebound on Wednesday a trap? July 29, 2021 473

  • Hong Kong’s Hang Seng index closed 1.54% higher on Wednesday. Which was sent the HSI 8% decline over a span of two days. Triggered by regulatory fears over sectors such as technology and private education.
  • Chinese tech stocks in Hong Kong, among the hardest hit in the recent sell-off, had a rebound on Wednesday.
  • Despite strong volume, the need to clear above key support turned resistance will then remove the threat. After all, clear downtrend has been formed and escalated by the Chinese government.

 

If we take a closer look at Fig 1b above, credit outflow within the Chinese economy has been slowing down at the start of 2021. If we look back at January 2020, where the Covid out break was first started, the Chinese Government has been injecting money into the market to sustain the fight of the Covid situation, the exponential growth even outpaced the pace of money supply growth back in 2016.

 

As such, China A50 index broke new high in July 2020. As such, the growth until February 2021 this year. Looking from the technical perspective, the China A50 index has potentially completed a 3-waves corrective pattern whereby the last leg has seen some slight rebound at 100.00% expansion level. That said, only by sustaining above the zone at 14,542.97-15,146.91 then we could confirm the 3-waves pattern completion. Coincidentally, the 1:1 expansionary level confluence with the multiyear resistance turned support zone. 

 

About the author

Profile photo of Chua Wei Ren

Chua Wei Ren
Technical Analyst
Phillip Securities Research Pte Ltd

Wei Ren specialises in Technical Analysis and has 11 years of experience in studying classic technical price action. He also study and research extensively on Elliott wave theory, Dow Theory. He believes that history plays an important role in how the market is reflected in the future.

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