Signs of life emerge in battered Hang Seng Tech

• Reversal signal shifts focus to 4,400
• Supportive news flow lifts China tech sentiment
• Break above 4,400 may target 4,620

Hang Seng Tech may have just delivered a near-term bottoming signal

There have been plenty of false dawns for Chinese tech over the past year, meaning this one deserves a healthy degree of scepticism. Even so, the combination of price action and increasingly supportive news flow suggests it's at least worth paying attention to.

Reports suggesting Chinese AI models continue to close the gap on the global leaders have helped reinforce the view the country remains a serious player in the AI race. Hong Kong is also seeing another wave of technology IPOs, with AI, autonomous driving and semiconductor firms lining up to raise fresh capital. On the mainland, Beijing is also making it easier for strategic technology companies to list domestically, another sign policymakers remain committed to supporting the sector. Valuations also remain cheap relative to regional and US rivals. 

While none necessarily explain the recent price action, taken together they point to a more supportive backdrop for the sector than we've seen for some time.

Whether that's coincidence or not is open to debate. But it does make what's happening on the chart a little more interesting.

Source: TradingView

Hang Seng Tech printed a clear hammer candle from 4,250 late last week, the same swing low established back in April last year. After such an elongated bearish trend, it's the type of price action you often see when selling pressure begins to exhaust.

Of course, a hammer candle on its own proves nothing. Confirmation is needed. That's why I'm watching 4,400 closely.

The index bounced from that level last week and is testing it again today. A move above 4,400, particularly on a closing basis, may strengthen the case that a near-term low is in place. I'd have greater confidence if the breakout was followed by a successful back-test and bounce from the level. Importantly, a close above 4,400 would also complete a bullish reversal pattern on the Hang Seng Tech futures contract, providing confirmation across both markets.

If buyers can maintain the recent momentum, or extend it further, one option for those looking to position for upside may be to consider longs above 4,400 with a tight stop beneath the level, initially targeting 4,620, the breakdown zone from where the latest bearish move began.

If 4,620 were to give way, attention may then shift towards 4,820, a level that's acted as both support and resistance, along with the 50-day moving average and long-running downtrend resistance from the October 2025 highs. The downtrend, in combination with the 100-day moving average, has repeatedly proven to be formidable resistance, often sparking major bearish reversals.

Like the price action, momentum indicators are also becoming a little more encouraging. RSI (14) has broken the downtrend that had been in place throughout much of June and is starting to edge higher. At 33, it still points to weak momentum, while MACD has yet to confirm the improvement, suggesting some caution remains warranted.

However, the indicator that's caught my eye is the ATR stretch shown in the lower pane, which measures how extended the price is from the 50DMA relative to recent volatility. While the current reading isn't overly extreme, similar readings have often coincided with some form of short-term squeeze higher.