Again, what a day to be in equities. Whoever kept your fingers, toes and other crossable entities positioned for me overnight, I owe you one! It looks from European and American (futures) markets that the going will keep being strong for a while, and as has been indicated earlier today, the break was well awaited following the US nonfarm payroll numbers that started the month off. In fact, I was over-bullish by seven days on the call, and it required a regional, China-related trigger to force it out in the Hang Seng Index. Always something new learned! Anyway, the total turnover required to achieve the breakout – in excess of HK$400 bn – was even higher than my estimates, which I should chalk down to not considering the 252 day SMA, right at the 21 000 line. Keep in mind, that analysis is three weeks old, but still held fairly well. Lesson: volume has a lot of importance to the HSI!
The first question you need to ask is whether this rally can be sustained throughout the rest of the week. There’s the correction case, and the continuation case. First of all, European news trump all of these things, so watch the news tonight. Adjusting for that, looking at peer indices, the rest of them were pushing into very, very high territories, the best example being the Dow Jones futures hitting 12 955 (3 year 8 month high!) but pretty much everything else is still extending their post-US-AAA highs. Traders seem to be giving up the idea of seeing the EURUSD in the daily ichimoku cloud though, and it’s selling of steadily as it should, while the real risk assets cling in there. Commodities flat or up modestly, riskier currencies (not tied to the euro) up, and most indices going way higher. Momentum is there, and save a total disaster tonight, I think things are looking up. Another factor is the longer consolidation at 20 960, which flushed the shorter term momentum oscillators a bit and for example gave ADX traders some space to re-enter tomorrow.
With this out of the way, the next question is naturally “where to?”, and it requires a bit of scenario analysis, which should not surprise you. Again, the HSI 22 000 to 22 500 call stands, where I suspect a bounce and retracement to the 252 SMA or the 20 960 – 21 000 level is needed for launching higher. The question is the time frame and the processes until then, but I have a feeling that since the sell-off would be so small, 5-7%, this round trip could easily be achieved by the time for the Greek bond payment wall on March 20th. A quick and light-volume retracement would of course indicate a rebound, while a more heavy volume move – most likely achieved by stacked bearish candlestick formations backed up by the heavy weight of several days of volume – requires deeper fundamental analysis or simply praying for more liquidity spraying when the time comes.
What was cracked and where will the candy from this piñata fall?
For all intents and purposes, and despite how much my high beta plays went up – more later – or how much I am kicking myself over not investing in energy, today was owned by one thing that moved the HSI: property. It’s staged a massive comeback and the HSI Property Index has a YTD beta versus the HSI of 1.5!
All of them are pretty much ripe for further breakouts, but all for different reasons. Still, this was the volume play of the day, and there are technically important levels to play off of in some way or another, so I think almost all of you will find something you like here.
Yesterday we had the 252 D SMA break, not shown, but it coincided with the trend line, and you can still see the resistance line, indicating that it’s pretty impressive a crack. Notice how both 21/63 MACD Divergence turns a bottom (in positive territory), the massive run in the 11 day +DMI (green) and the Bollinger Band proximity to price. 123, 131, 136… Massive 21 EMA rejection as well, *hinthint*.
Also: Still just tangenting the August 5th / September 1st highs, although closing above those days’ closes.
Sun Hung Kai Properties:
Sun Hung Kai does significantly better on the last measure, while showing less exuberant levels in the 21/63 MACD, a clearer, HKEx style trend break (that I didn’t catch) and a lower base level break in the 11 +DMI, which validates the strength of the move better. Thus, a mixed bag of over-performing indicators and some under-performing ones… Most worthy of note is the HK$110 level breakout, which leads today’s volume ramp/breakout/whatever. Also notice the reverse of a crisis candle forming (gap higher, close lower than open, the only thing that’s missing is the tail on the upside). I don’t know if it’s surely bullish as of yet, but just thought you might want to know.
Exponentially weighted Bollinger Bands again prove to be ruling the day, and the HK$ 120 level? Probably needs some more volume massaging. Why? It’s a massive support/resistance zone started in late 2007 as the rally retraced for all but one week, and created a hook right there. It was the closest Pre-Lehman peak, where price consolidated before running up to and falling from consistently for over one year only to be massively broken in late 2010, and so on and so forth. TL;DR: caution advised.
Straddle? Or your best opportunity to be short on the market retracement? Could well be.
Hang Lung Properties:
Prior to all the recent market turmoil this stock seemed to perform much worse, but afterwards has tracked rather well with peers. No significant new high yet, but the price action just to get back here was pretty impressive. S/R line speaks for itself, underlying technicals in price or volume related terms seem less exuberant, and the targeting seems fairly easy, HK$ 33, 36, 38, 40… Bollinger band expansion and longer term worries way less pronounced than in SHK PPT.
If you read me, you practically read about HKEx.
3.96% up today, taking back some of that under-performance mentioned the weekend before last, and of course making a new high catching up with the exponential Bollinger. Not much new under the sun, HK$147.1 closing, still hoping for that last 2% squeeze for option gamma repositioning. Also check the last month’s ramp and how the price bumped against the lower trend line of that ramp today. Hey-oh, gains, here we come!
ICBC flirted with the idea of breaking HK$5.53, then gave up and saw the Exponential 63 day Bollinger sail away, came down under the HK$5.35 line, and stayed there for a while, until the 21 EMA ran against it, and on the second touch, it jumped this entire zone in a day after the third EMA touch! Wow! Still below the HK$ 5.6 highs, so it is likely that there are clustered sell orders in the region, and this is endemic to all the larger Chinese lenders’ charts. Lately, news have not been unanimously positive for the bank, although there are analyst upgrades and recommendations, they’re not quantitatively strong enough to have a significant impact on the price in my view, and I would like to see a clear trading day closing above HK$5.6 andnever trading below HK$5.53 to be really confident in putting my money in. Then, I’m at least expecting a run to HK$6, so I can give up the potential breakout.
Nothing really new here that you wouldn’t have caught if you read my previous analysis. Galaxy is unsurprisingly hitting HK$19 (+1.02, 5.68%) on high volume after posting a full week of dojis! Implied volatility is back baby! Bye bye HK$ 18 resistance! Next stop HK$20.
Sands is up again to near its all-time highs, but chances are you have a view of it that makes more sense than mine.
SJM finally broke the last trend line I have posted of it with a full day of trade above trend, and the HK$ 15-(16)-17-19 call chain play can finally be enacted! Don’t think it’ll have the time to run that far in a month, so “taking it easy” with an expectation for max 16% rise up to HK$17 – but more likely 16.5 – before I have to step out. Beware the 252 SMA though at HK$ 15.07.
Not much new here either. Jiangxi Copper could have been traded to a tee with my tactical view of not holding for long above the 252 SMA, so I’ve been sitting pretty on this one, even though I have been longer term than to attempt to play these swings given the fundamental environment we’re in. Suffice to say, today’s 5% jump really helped the bullish case, especially as the candle was a high-volume marubozu almost erasing three close-on-close and consecutive close-on-open falling long-legged doji candles! Again, back to the 252 SMA, then watch closely if we can take the HK$22.5 the second time around.
Gold is pretty uninteresting at the moment, which highly surprises me, but thankfully there is no shortage of tradeable alternatives! You could position for some sort of MA-bounce-to-breakout, but then again there are better places to put your money.
And that’s it for me. Short vacation in the city of the best nightlife I have ever known, plus a potential snow dousing going on a 3.3% US$ discount to peak. With some luck I will be able to bring some deeper equity insights back with me after this trip as well. Hope this tidies you over through the weekend, and see you again after I come back from Tokyo!