- The Hang Seng did very little during trading on Thursday, even though it’s one of the few indices out there that will not be as impacted by the Christmas holiday.
- It looks as if the market is trying to find some type of resolution to the idea of HK$20,000 being a major resistance barrier.
- If we can break above that area, then it’s likely that we could see a bigger move to the upside, perhaps a move to the HK$21,000 level, maybe even the HK$22,000 level.
Keep in mind that a lot of traders around the world use Hang Seng as a proxy for mainland China, even though only some of the companies, the “A shares” are devoted to that part of the world. China has a lot of issues right now so I’m not particularly fond of buying Chinese equities and I do think that it’s probably only a matter of time before we turn back around. Breaking below the 50-Day EMA opens the possibility of a deeper correction, perhaps down to the HK$17,000 level. Breaking below that level then opens quite a bit of downward pressure, perhaps the Hong Kong dollar level.
Position Sizing is Crucial
Rallies now will more likely than not struggle, but if we can clear the high as of the last couple of weeks, it’s possible that the Hang Seng may go looking toward the HK$22,000 level, but you are going to need to see a “risk on” type of environment. Right now, I just don’t think we have that, even though China is trying to reopen. After all, there are 37 million new cases of coronavirus on the mainland reported daily, and it seems as if China is a good two years behind the rest of the world in fighting the infection.
More likely than not, we see a lot of back-and-forths range-bound trading right around this HK$20,000 level over the next several days, if not the next couple of weeks. We will have to see what happens with the major trading houses around the world and how they search for a position, which is going to be after the new year holiday. Because of this, position sizing is crucial.
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