Tencent reaches Head and Shoulders target on negative news

Tencent Holdings LTD is down nearly 20% over the last 2 days as Chinese Banking officials are set to pass down a record fine

Downtrend 1

Tencent Holdings LTD is down nearly 20% over the last 2 days as Chinese Banking officials are set to pass down a record fine worth “hundreds of millions of Yuan”.  According to the Wall Street Journal, the company faces violations related to its WeChat Pay mobile network, as the firm is said to have failed to comply with regulations regarding Know Your Customer and Know Your Business.  In addition, the firm is also being hit with penalties for failing to regulate transfers of illicit funds and money laundering, such as for transactions related to gambling.  Until now, the large tech company had escaped the big crackdown on tech firms by Chinese authorities.  It should also be noted that the stock has been dragged lower by the overall performance of the Hang Seng in general, which is down 20% in the last 11 trading days.

Tencent made an all-time high on February 18th, 2021 at 772.50 and has been moving lower since.  The stock attempted a rally in May 2021 but failed, thus falling through the neckline and creating a head and shoulders pattern.  The target for the pattern is the height from the head to the neckline, added to the breakdown point at the neckline.  In this case the target was near 330. The target was finally reached yesterday.  The stock price also fell through horizontal support (lows of March 2020) at 323.  Notice the RSI is extremely oversold at 12.03, an indication that price may be ready for a bounce.

20220315 tencent daily

Source: Tradingveiw, Stone X


Trade Tencent now:  Login or open a new account!


For support and resistance levels, its best to zoom out to a weekly chart.  The first support level is the previous low from the week of October 28, 2018 near 249. Below there is the 127.2% Fibonacci extension from the low of the week of March 16th, 2020 to the highs in February 2021, near 200.50.  First resistance is at previous support of 323, then the gap fill from last week at 360.  Above there, horizontal resistance crosses at the lows from the week of August 16th, 2021 near 410.

20220315 tencent weekly

Source: Tradingveiw, Stone X

Tencent Holdings had been moving lower before this week, as it was falling with the Hang Seng.  However, record fines for failure to follow regulations helped Tencent to underperform the stock index.  Given that it has fallen so far, so fast, along with the extremely oversold RSI indications,  it’s possible that the stock may be ready for a near term bounce!

Learn more about equity trading opportunities.

Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

Open an Account