Featured Trade HK Stock A potential corrective rebound looms for Tencent ahead of earnings
Tencent bears time to be cautious
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Medium-term technical outlook (1-3 weeks) on Tencent Holdings (HKG 0700)
Key technical elements
- Tencent Holdings, a key component stock in the Hang Seng Index and the MSCI Emergent Index will announce its Q3 2018 earnings results today, 14 Nov at 8pm (HK time). In our previous “Featured Trade” report dated on 26 Sep 2018, Tencent had declined as expected and met the target/support at 272.00/269.80 as it printed a low of 251.40 on 30 Oct 2018. Click here for a recap.
- Current elements are now showing signs of easing downside momentum in the medium-term (1 to 3 weeks).
- The recent plunge after its “bearish flag” range configuration breakdown on 02 Oct 2018 has reached the lower boundary of a medium-term descending channel in place since 21 Mar 2018 high (see daily chart).
- The on-going minor decline from 02 Nov 2018 high of 303.80 to 13 Nov 2018 low of 260.00 has been accompanied by declining volume which suggests a lack of bearish bias participation (see daily chart)
- The daily RSI oscillator has staged a bullish breakout above a former significant corresponding resistance at the 44 level coupled with a prior bullish divergence signal seen at the oversold region.
- The key medium-term support rests at 249.15 which is close to the recent swing low of 30 Oct 2018 and a Fibonacci projection cluster.
- The significant medium-term resistances stand at 312.20 and 319.00 (upper boundary of medium-term descending channel from 21 Mar 2018 high & 23.6% Fibonacci retracement of the decline from 29 Jan 2018 high to 30 Oct 2018 low.
Key Levels (1 to 3 weeks)
Immediate support: 262.00
Pivot (key support): 249.15
Resistances: 312.20 & 319.00
Next support: 214.50/212.20
Conclusion
The on-going major downtrend in place since 29 Jan 2018 now faces the risk of a corrective rebound before another impulsive down move structure materialises. If the 249.15 key medium-term pivotal support holds, the share price of Tencent may see a rebound to target the medium-term resistances of 312.20 follow by 319.00 next.
On the other hand, failure to hold at 249.15 reasserts the bears for another round of waterfall decline to target the next support at 214.50/212.20 (former medium-term range resistance of 06 Sep/26 Oct 2016 & Fibonacci projection cluster).
Charts are from eSignal
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