Hang Seng Tech eyes breakout as Alibaba takes the stage

• Index rebounds above 200DMA after multi-month lows
• Momentum signals still lean bearish despite recent strength
• Alibaba earnings and AI narrative could act as a catalyst

Summary

Hang Seng Tech Index is showing signs of renewed strength, with recent price action hinting at upside potential as momentum builds near key technical levels. A major catalyst could come from Alibaba’s upcoming earnings on Tuesday, especially with investor enthusiasm surrounding its newly launched AI model, which has already surpassed 10 million downloads. If results and guidance reinforce this narrative, it could provide the spark needed to extend the index’s recovery and fuel a breakout.

Hang Seng Tech Reclaims 200DMA

Source: TradingView

Is the rout in Hang Seng Tech coming to an end? That’s the question traders should be pondering today following the rapid rebound of recent days, seeing the index recover from multi-month lows to trade above the important 200-day simple moving average. It will be important on Tuesday, providing a level to build setups around depending on how the price action evolves during the session.

Before looking at potential ideas, the message from RSI (14) and MACD remains entirely bearish, with the former trending lower beneath the neutral 50 level while the latter sits at depressed levels having already staged a bearish crossover of the signal line earlier this month. With the 50-day moving average curling lower and the price in a clear downtrend, the broader message favours short setups over long.

Given that backdrop, an inability for the index to sustain its push above the 200DMA would generate a potential short setup, allowing for positions to be established beneath it with a stop above for protection. 5500 acted as both support and resistance earlier this year, making it screen as a possible initial target. If it were to be broken, 5325—where the index slide stalled on Friday—would be the next after that.

While bearish setups are favoured, it doesn’t completely dismiss the case for countertrend longs should the index continue to trade above the important 200DMA. If the breakout sticks, longs could be set above it with a stop beneath for protection, targeting the October downtrend and/or 5730 resistance. If those levels were to be broken cleanly, it would hint at the start of a new trend, opening the way to higher levels such as 5978, the 50DMA or 6200.

Alibaba Earnings Eyed

Alibaba will release its earnings before the U.S. open on Tuesday, with the conference call scheduled for 7:30 a.m. Eastern Time (8:30 p.m. Hong Kong Time). Traders should look closely for guidance on margins, cloud growth, and AI initiatives, given the recent surge in interest around its Qwen AI model.