- The Hong Kong 50, the benchmark index of the Hong Kong Stock Exchange, has ran into a bit of a brick wall over the last 36 hours in the form of HK$18,000.
- With this being the case, it looks like the market is due for some type of pullback, but it’ll be interesting to see whether or not we can find buyers underneath.
- This might be a backdoor way to play Chinese equities, as you get the stability of Hong Kong without a lot of the hassles of trading on the mainland.
Technical Analysis
The shooting star from the Monday session hitting the HK$18,000 level suggests that we are overdone and it’s also worth noting that the HK$18,000 level has previously been resistance. That being said it does make a certain amount of sense that we would see a pullback at this point, and we could reach down toward the 200-Day EMA. The HK$17,250 level features that indicator, so that might be where we end up. Any type of bounce in that area should be thought of as a potential buying opportunity, but I would need to see that on the daily candlestick.
On the other hand, if we were to break down below the 200-Day EMA, then it’s likely that we could go down to the HK$16,600, which is an area that we have seen a lot of noise previously and of course also features the 50-Day EMA. However, you can also make the argument that we break above the HK$18,000 level, we could really start to take off to the upside, reaching toward the HK$19,250 region.
In general, you need to see this as a market that is a way to play China, but it is also a way to play the overall Asian region. It’s also worth noting that it is highly sensitive to the global markets, and of course risk appetite. So even if you don’t trade this index itself, you can use it as a proxy for how people feel about investing in Asia, which in its sense is also the same way they feel about anything that’s not based in the United States.
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