- The Hong Kong Hang Seng index has been rather bullish for some time, which is why I’ve started to cover it a bit more.
- The recent action has been somewhat quiet, but what’s interesting is that the market is perfectly comfortable hanging around his general vicinity, which of course features the HK$21,000 level as potential support.
- Because of this, it looks as if the market is taking a bit of a breather after a nice shot higher.
Keep in mind that Hong Kong is one of the first places institutional money will go flowing to when trying to play China, mainly since the market itself is much more advanced than some of the mainland markets. Because of this, a lot of times it can lead the way, but it should also be noted that you can only read so much correlation between Shanghai and Hong Kong.
Waiting for a Pullback
Looking at this chart, the 50-Day EMA is starting to rally a bit, perhaps trying to reach toward the 200-Day EMA, forming the so-called “golden cross.” This is a longer-term buy-and-hold signal, and it’s probably worth noting that the market recently broke above a major trend line, so it all comes together as a sign of strength. A lot of this comes down to the idea of China reopening, and perhaps part of that is since the government is starting to soften its stance on pandemic controls. After all, we are 3 years into this mess, and China still lags behind the rest of the world.
Just above, the HK$22,000 level is an area that I have pointed out multiple times, and there’s nothing on the chart that suggests we cannot get there. Whether or not we can break the above there is a completely different situation, but now it certainly looks like we are going to try to do so. Breaking above that level does open the possibility of a much bigger move, perhaps all the way to the HK$25,000 level. Having said that, I don’t have any interest in trying to “front run the market”, because a significant pullback can either offer value if you are flat or put a lot of pressure on your trading account if you are already involved in the market at far too high a price.
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