Hang Seng Tech Index: Bulls pause with Alibaba, Nvidia in focus
The Hang Seng Tech Index has lost momentum after leading the China rally this year, with Alibaba and Nvidia earnings set to provide the next big test for directional risk.
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Summary
The Hang Seng Tech Index has stalled having led the China equity rally throughout this year, showing rare signs of caution ahead of a busy period for earnings. Alibaba reports Thursday with the focus again on its AI strategy, though like Tencent and Baidu, big investments have yet to deliver with revenues squeezed by weak consumer uptake and fierce price competition. With Nvidia earnings due after the bell on Wednesday, how the index trades around these key updates may provide a guide on directional risks for the broader Hang Seng and other Chinese markets heading into September.
Hang Seng Tech Rally Pauses as Key Earnings Near
Source: TradingView
You can see how the sharp rebound in the Hang Seng Tech Index following Jerome Powell’s speech at the Jackson Hole has stalled this week, with the contract struggling to hold above the July 24 swing high, topping out at 5855 before reversing lower. Given the unconvincing price action, it’s worthwhile taking a look at key levels located nearby, allowing traders to assess potential setups before and after this period of major corporate event risk hits.
On the downside, 5705 provided both support and resistance over the past two months, making it the first level of note. Beyond that, the October 2024 swing high of 5484 saw plenty of action earlier in the year. Combined with the uptrend running from the low set on April 16 and 50-day moving average, this support zone that extends down to 5440 could prove difficult to crack without a major risk-off episode. If it were to be broken, 5391, 5320, the 200-day moving average and 5100 are the levels to watch.
On the topside, a clean break above 5855 would put the March swing high of 6209 on the radar for bulls, with only the psychological 6000-point level in between.
Given the index remains in an uptrend and comfortably above the 50 and 200-day moving averages, which are also moving higher, buying dips and bullish breaks remains the preferred strategy. Momentum indicators back this view, with RSI (14) trending higher above 50 while MACD sits in positive territory having already crossed the signal line from below earlier this month. Combined, a bullish directional bias is favoured.
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