Infinite levitation mechanisms seem to have been enacted over in other indices worldwide, but Hong Kong is lagging behind a bit. Given, as is mentioned in the post below, today was the pre-HSBC results trading day, so a lot of portfolio shuffling took place. Some wider trends to watch however:
- Turnover seems to have plateaued into a comfortable range of HK$ 60-70 bn, which of course given the higher market valuations implies less trading volume. Keep in mind that the cash inflow is the main multiples expansion/compression driver for the Hang Seng, which requires higher trading volumes to take place.
- Chinese mainland listed stocks are wildly outperforming the HSI, implying a negative worldwide trade view, a Chinese equity catch-up, and extreme underperformance on local names, particularly in finance.
- The HSI aggregate P/E is at 9.9, putting the relative premium in most of Europe at 20%, US at 30-40%, and other high risk trade-related indices (OMX30, TWSE mainly) at 50 to 80%.
- Commodities are generally high, which should act as a supporting factor on the HSI, and it’s highly visible in the AUD/USD exchange rate (up 1% intra-day!)
- US exchange volumes are down broadly into the rally (with the Dow again pinging 13 000, and the S&P 500 at a nice 1 369), although Asian exchanges are maintaining turnover. This would suggest that traders that have the ability to are taking profits and starting a wilder round of diversification which should be extremely positive the HSI, given the high risk entry that has seen both indexes and currency soar in higher quality European risk areas, the continued Chinese support for internal growth, and the otherwise supportive picture for world trade if Greece temporarily doesn’t crumble.
Thus, in short, I keep watching for the 22 500 print, forecast near the very bottom of the post. Again, the world market view is fairly uncertain given all the data and policy awaited, and I am two weeks late, but still, the 22 500 would represent the best selling opportunity since the 21 000 – 20 960 levels has not been attacked since being cleanly crossed, and the prior highs around 21 100 working excellently as support. Further Chinese easing should be more long term, and I do expect that to become a more important factor on the rebound off the fall after printing above 22 500, especially if it can be timed to coincide with the climbing of the debt wall overhang for Greece on March 20th.
A lot of my favorite names are approaching tipping points, so why not take a look closer into specific equities? Charts courtesy of Interactive Brokers.
We’re still holding well above the 21 day (monthly) EMA, and I would wait for an 11 day ADX/DMI cross on the bullish side first. The post-HK$137 trend line crack is still intact however, and the current 189-252 day SMA (surprised by the strange numbers? Three quarters, and one year worth of trading days!) range seems to be the point of last resistance for this stock. The 21 EMA should come in and restrict this to the upside, proving it holds and the momentum trade is upwards, and the scenario pointed out in the bullet points above actually plays out. Still, the 21 EMA rejections to the upside are pretty impressive, so try to time purchases with any approaches that price makes to this level.
Yup, we’re still stuck below HK$5.6. Anyone following my recommendation on this stock (stay away entirely until trading clean above HK$5.53 and closing above HK$5.6, or alternatively to go short for capital to put elsewhere) could do worse! We posted a pretty impressive doji today, which should be the catalyst for a move either way. Whichever clicks in first of an 11 day ADX/DMI bullish cross or the bottoming of the 21/63/21 MACD divergence is the signal for me to go in, as things are looking fairly good here, but it’s still not a play that I am expecting particularly spectacular returns on. For more on that, see below stocks.
Still, given that the play I’m considering here is pretty strongly levered (thank you warrant issuers!) and the propensity for the stock not to clear the resistance levels I have previously identified has allowed me to save a pretty (big) penny on this one, and does seem to clear the stage for a more explosive move when we do finally get it. I do expect the move to be very fast, but not particularly strong, so barely OTM mainly medium dated warrants are on the table, with a preference for favorable IV rather than theta still. one might be inclined to hold out ever so much longer, using the bottom trend line (which is rapidly rising) as the entry catalyst given how much the stickiness this level of price has. HK cent 1.8/day, so wait another three weeks and see that Monday?
This company today gets to represent precious metals producers (remember its gold exposure?) overall, as their technicals are very much the same lately. Hemmed in between the same SMA’s as HKEx and getting the same bullish invasion by the 21 EMA, this seems more like a long-term intermediate consolidation for everyone to contemplate the sustainability of the upwards moves and the potential for a stronger cyclical upswing. Keep in mind the wicks of the last few candles as well, rejecting the bottoms strongly! It’s trading pretty firmly right above HK$20 as well, with a closing-term bias to be above HK$20.9, and with easing prospects in China and Japan coupled with upwards momentum to both copper and gold, why not? Volumes are fairly low in this flagging-about trading, so expect volume return to kick in as soon as we leave the 189-252 SMA trading band.
The same features show up almost identically in the gold miners Zhaojin Mining and Zijin Mining.
Galaxy Entertainment Group:
Are bears waiving the second flag before the great surrender? Some pretty good differentiation and loss of herd-following mentality seems to have set in in Macau casinos overall, and differentiation based on actual fundamentals does seem to matter increasingly more. Buying the cheap Macau growth is the name of the game, so Sands seems to be out of the portfolios lately (got growth, but expensively) and Galaxy is pretty much flat, but with big ranges.
It does appear that the problems come crowding in at crossing the HK$19 line, but the HK18.62 resistance is holding nicely, and do keep in mind that no momentum indicators are bumping up against it yet, so maybe we should chill for another week, let the 21 EMA catch up to price a little bit more seriously, reject a bearish 11 day ADX/DMI cross, and see 21/63/21 MACD create a local divergence bottom in an uptrend, which would launch it higher explosively. And yes, that implies HK$22 or above in a few months, two maybe. Also keep in mind that volume has been pretty mute here, traders not seeing much conviction either way after the touch of HK$19. Volume return is – no matter your view – the likely catalyst for the next move.
Note the added narrowing trend in this chart. It basically tracks the support for the late ramp, but does go a way to show what the trend looks like, and given the over and undershoots to it, feels like a “normalcy” trend, where if things go as reasonably expected price will be within this range. It’s not “strong” since the trading in areas near the month shifts into both November and January saw price depart, so please to take it with a pinch of salt, but feel free to enjoy the view nonetheless!
For the more impatient among us, there is of course better plays. That have volume. Like SJM Holdings. Remember the name of the game, cheap Macau growth? Well, doesn’t get much cheaper than here, and with really ridiculously downbeat profit margins, as I’ve alluded to before, any policy easing in China and mass market gaming growth should disproportionately show up in the profit margins of the biggest market share operator. Price has now officially left all of its SMA’s trailing it, meaning that there is room for explosive upwards movements in share price as well, timed to the beat of profit-boosting headlines. 1.5 P/S isn’t something much to sneeze at!
The explosive up-move could already be underway: volumes are rising sharply, and the MACD up-trend divergence bottom mentioned above is just forming. The lead is that the MACD line is going upwards so fast, that even though the histogram might be somewhat unclear, we can deduce from the push/slope of the MACD-line that there will be a bottom placed in the histogram within a few days. Add to that the clear trading pattern appearing in the stock this year: 3-5 days worth of rally, one or two days of retracement, where the rally days see on average higher volumes than the fall days. The last push is the clearly most volume supported – all three last days had high and increasing volume – and we’re on count four in day-terms. HK$19 coming right up, buttercup! Wait for the retracement coming this week, and buy in hard on the close of the day!
Have fun shuffling around on deck this week, everyone!