HK Stock Focus: Positive elements sighted in Tencent ahead of earnings

Potential bullish breakout looms for Tencent Holdings.

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



Key technical elements

  • Since its recent 16% decline seen from its current all-time high of 476.60 printed on 29 Jan 2018, Tencent has started to consolidate with positive technical elements ahead of its Q4 and annual 2017 earnings announcement tomorrow, 21 Mar. A conference call will be held at 8.00 pm (HK time) after the close of the Hong Kong cash stock market.
  • The recent two uplegs from 09 Feb low of 398.00 to 21 Feb high of 458.00 and 05 Mar low of 425.00 to 16 Mar high of 472.80 has been accompanied by increasing volume (see daily chart).
  • The daily RSI oscillator has managed to stage a bullish breakout from its former corresponding descending trendline (in line with the price resistance from its current all-time of 476.60) and continued to inch higher from its ascending support at the 50% level. These observations suggest a revival of medium-term upside momentum and a bullish pre-signal to indicate an impending bullish breakout above the 476.60 current all-time high level.
  • The primary uptrend of Tencent from its 23 Dec 2016 low remains intact as it continues to evolve in a bullish ascending channel. The resistances (upper limit) of the channel stand at 500.50 follow by 521.10/52.90 which also confluences with a Fibonacci projection cluster (see daily & weekly charts).
  • The intermediate support rests at 447.00 (the recent gapped up seen on 12 Mar 2018 follow by the key medium-term support of 425.00 (05 Mar 2018 swing low & 61.8% Fibonacci retracement of the on-going recovery from 09 Feb low to 16 Mar 2018 high).  

Key levels (1 to 3 months)

Intermediate support: 447.00

Pivot (key support): 425.00

Resistances: 476.60, 500.50 & 521.10/525.90

Next support: 364.00

Conclusion

Technical analysis on the stock price of Tencent Holdings suggests that its primary uptrend in place 23 Dec 2016 low remains intact despite the recent 16% decline seen in late Jan 2018 to 09 Feb 2018. Current key technical elements suggest that the stock may soon stage a bullish breakout above its 476.60 current all-time high level and resume its bullish impulsive upleg sequence.

Therefore as long as the 425.00 key medium-term pivotal support holds and a break above 476.60, Tencent is likely to stage another potential upleg to target the next resistances at 500.500 and 521.10/525.90

However, a break below 425.00 shall put the bullish tone on hold to open up scope for an extension of the corrective decline towards the next support at 364.00 (medium-term swing low of 06 Dec 2017, the primary ascending channel support & 38.2% Fibonacci retracement of the primary uptrend from 23 Dec 2016 low to 29 Jan 2018 high).

Charts are from eSignal




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