Tencent (HK: 700) sell-off near 420.00 signals an end of the intermediate phase of the impulse 5-wave momentum. However, based on our technical and wave analysis, the stock will see a short term rebound:

1. The stock has completed it’s 5-sub wave of the corrective wave (A) and the next phase is the rebound to form wave (B).
2. Price action analysis indicate that the bearish has temporarily exhausted itself by forming a long legged doji above the 200.0% expansion level of wave 1-2.
3. Bullish divergence of the Relative strength index at the oversold region indicate a return of the bullish momentum.

*The technical call is valid only for 3 weeks.

*Although the bulls are seeing a return based on the immediate technical indications, the overall direction is still largely bearish. As such, the long trade should be taken with caution.

*The final trading hour on Thursday (19^th March 2020) had a slight sell down before the Stock close for the day. As such, the hourly support of 334.40 should not be invalidated.

* The 20 SMA has crosses below the 50SMA, therefore the stock has entered into a mid-term bearish scenario.

CHART LEGENDS

Simple moving average

Blue dotted line = 50 SMA

Green dotted line = 20 SMA