Featured Trade (HK Stock): A potential corrective rebound looms for Tencent ahead of earnings

Tencent bears time to be cautious

Medium-term technical outlook (1-3 weeks) on Tencent Holdings (HKG 0700)



Key technical elements

  • Tencent Holdings, a key component stock in the Hang Seng Index and the MSCI Emergent Index will announce its Q3 2018 earnings results today, 14 Nov at 8pm (HK time). In our previous “Featured Trade” report dated on 26 Sep 2018, Tencent had declined as expected and met the target/support at 272.00/269.80 as it printed a low of 251.40 on 30 Oct 2018. Click here for a recap.
  • Current elements are now showing signs of easing downside momentum in the medium-term (1 to 3 weeks).
  • The recent plunge after its “bearish flag” range configuration breakdown on 02 Oct 2018 has reached the lower boundary of a medium-term descending channel in place since 21 Mar 2018 high (see daily chart).
  • The on-going minor decline from 02 Nov 2018 high of 303.80 to 13 Nov 2018 low of 260.00 has been accompanied by declining volume which suggests a lack of bearish bias participation (see daily chart)
  • The daily RSI oscillator has staged a bullish breakout above a former significant corresponding resistance at the 44 level coupled with a prior bullish divergence signal seen at the oversold region.
  • The key medium-term support rests at 249.15 which is close to the recent swing low of 30 Oct 2018 and a Fibonacci projection cluster.
  • The significant medium-term resistances stand at 312.20 and 319.00 (upper boundary of medium-term descending channel from 21 Mar 2018 high & 23.6% Fibonacci retracement of the decline from 29 Jan 2018 high to 30 Oct 2018 low.

Key Levels (1 to 3 weeks)

Immediate support: 262.00

Pivot (key support): 249.15

Resistances: 312.20 & 319.00

Next support: 214.50/212.20

Conclusion

The on-going major downtrend in place since 29 Jan 2018 now faces the risk of a corrective rebound before another impulsive down move structure materialises. If the 249.15 key medium-term pivotal support holds, the share price of Tencent may see a rebound to target the medium-term resistances of 312.20 follow by 319.00 next.

On the other hand, failure to hold at 249.15 reasserts the bears for another round of waterfall decline to target the next support at 214.50/212.20 (former medium-term range resistance of 06 Sep/26 Oct 2016 & Fibonacci projection cluster).

Charts are from eSignal




Join our live webinars for the latest analysis and trading ideas. Register now

GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.