Hang Seng 50 / Chinese Stock Market All-Time (1M) Long Idea Perfect reaction off the 0.786 Fibonacci retracement level following a break of structure. I expect TP within 2 years maximum.
MHI1! trade ideas
HSI: Already finished? 👀The HSI has risen sharply since Monday. Nevertheless, we continue to believe that the index is still working on a magenta-colored downward structure and is therefore not yet finished with its correction. Only after this five-part wave, and thus the turquoise-colored wave 3, has come to an end should things pick up a good bit - even if there is still further downside on a Long-term level. However, there is also a 33% probable alternative, which envisages a sustained rise and considers the past low to be the low of the green wave alt.(2). This scenario comes into effect if the resistance at 18 846 points is exceeded.
HSI vs SPXChina's Hang Seng index is -55% from the highs.
History doesn't repeat but often rhymes.
Russell Index also struggling.
Short setup, invalidation if Feb's monthly candle closes above ATH.
Will 2024 be a prosperous year for China?Will 2024 be a prosperous year for China?
After a period of strong gains and a close of the year near all-time highs, markets now seem to be facing a more tense climate with profit-taking on the world's major stock exchanges. Volatility has again become a major factor, with investors becoming more cautious and uncertain about possible interest rate cuts.
For our weekly appointment, we will focus on the most interesting stocks and futures contracts of the moment, as well as examine the general macroeconomic situation in the markets.
The stock of Moderna Inc (MRNA) has been performing excellently in the stock market. During the last session, Oppenheimer increased his recommendation from "market performance" to "outperformance." According to the analyst responsible for the stock, there will be numerous catalysts in the next two years that will drive the lab's growth. Moderna is expected to have as many as five products on the market by 2026.
It was a difficult week for shares of Mobileye Global Inc MBLY Group. The stock fell 25 percent on a sales warning and a rating cut by Wolfe Research from "Outperform" to "Peer Perform." The company, known for its autonomous driving technologies, issued a sales alert due to excess inventory at its major customers. Mobileye expects first-quarter revenues to decline 50 percent from a year earlier and has revised downward its forecast for the fourth quarter 2023.
In the energy market, oil prices posted a modest 1 percent growth on the back of rising tensions in the Middle East. Despite this, crude oil prices remain under pressure after a difficult 2023 in which they fell 10 percent. According to the latest monthly report from the U.S. Energy Agency, oil inventories declined by 5.5 million barrels but refined product inventories rose sharply due to weak U.S. consumption.
The industrial metals market, including copper, begins the year in decline in 2024. Copper prices in London fell below $8,400 per metric ton due to the strengthening dollar. Nickel also declined, influenced by increased production in Indonesia. Meanwhile, gold fell due to rising bond yields and fairly strong U.S. employment data. I recently wrote an article analyzing the forecast for the gold market, expecting a decline in the coming months.
The year 2023 was a year of recovery for stock markets, after a difficult period in 2022. Technology stocks rebounded strongly, while most financial markets in the West and Asia experienced a sustained recovery. The only exception was China, which struggled to rebound. In particular, the Hong Kong stock market recorded its fourth consecutive year of decline and was even outperformed by the Indian market in terms of capitalization. In 2024, we expect the Chinese revival to be a major theme to monitor, along with the start of the central banks' monetary easing cycle and the U.S. presidential election scheduled for November.
My focus is currently on the future Chinese Hang Seng Gen 2024 index, where I am applying my accumulation buying strategy. I am following the same strategy on the FISKER INC FSR stock.
Mini HSI Futures: Position for tactical rally on monetary easingOur View
We hold a favorable view of the Mini HSI Index Futures contract in the short-term on likely policy stimulus; but we prefer to wait out any short-term corrections before positioning for a near-term tactical rally.
Due to medium-term structural concerns and still-weak confidence among businesses and consumers, it will be a while before the market trades on economic and corporate fundamentals.
Key market drivers for 2024 include China’s growth trajectory (influenced by government stimulus, property sector woes, deflation risks), US interest rate trajectory, and geopolitics.
From a valuation perspective, the Hang Seng is trading at a Last 12 Mths P/E ratio of 8.7x, well below its 5Yr average of 11.3x. This is in contrast to a P/E ratio of 22.5x for the S&P 500.
Investors from mainland China have been a net buyer of HK stocks for the past 4 sessions, with data showing investors bought a net HKD 2.15bn of HK shares thru the stock connect program on 4th January.
We expect to see the PBOC delivering RRR and/or interest rate cuts in 2024. The PBOC recently weakened its yuan fixing by the most in over 6 months, signalling that policymakers may be shifting their focus from stabilizing the yuan to more monetary easing in a bid to revive growth.
Expressing Our View
We favour the hypothetical trade setup below in order to express our view.
Long Mini Hang Seng Index Futures:
The contract saw a bearish reversal from around the 17,050 level (orange line), which was a vital support level that was broken in early December, but now serves as a key support-turned-resistance level.
With a Fibonacci Retracement drawn from the December low on the 4-hourly chart, we prefer waiting out any short-term correction and taking entry near the 0.618 retracement level at 16,465. We set our target level at 17,050, and stop loss at the 0.786 retracement level around 16,250. This setup delivers a reward: risk ratio of 2.76x.
• Entry Level: 16,465
• Target Level: 17,050
• Stop Loss Level: 16, 250
• Profit at Target: 585 ticks x HKD 10
• Loss at Stop: 215 ticks x HKD 10
• Reward: Risk Ratio: 2.76x
HANG SENG Buy opportunity.Hang Seng (HSI1!) has been trading within a Channel Down throughout the whole year. As the rice hit its bottom (Lower Lows trend-line) on December 11 and the 1D MACD formed a Bullish Cross, we expect the new Bullish Leg towards the 1D MA200 (orange trend trend-line) and the to (Lower Highs trend-line) of the Channel Down.
The average rise within this pattern has been around 11% and based on that, we are targeting 17700.
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Bottom Today?The volume in the opening minutes suggests that HSI has or is about to bottom. Main accumulation was between 17k-18k.
Shakeout Incoming?Since my last post, Hsi did crawl up but was rejected strongly from 18400 and is back in the value area around 17500.
The way it is shaping up, i suspect that a strong shakeout is coming up in next few days in which HSI can drop all the way to 16k. If that happens, it will present a very good opportunity to get Long at the start of a possible multi month move UP.
To ride the fakeout, you can sell around 18k with SL above 15th Nov High. There is also a good chance that no fakeout happens and the move simply speeds up from here so manage your risk properly.
Hang Seng Index: Motivated! 💪The bulls were able to push the Hang Seng Index significantly higher on Friday, moving it further away from the yellow trading range between 17,424 and 15,571. However, we still expect the price to return to this area as part of the magenta wave (2) to make a lower low before the reversal occurs. That said, given the price action so far, we have to increase the probability of our alternative to 41%. In this case, the low of the magenta wave alt.(2) would already be in place and this scenario would come into play on a rise above the resistance at 18,898. However, it should be noted that our long-term expectation has already been fulfilled with the completion of the trading range. In both cases, there is considerable upside potential in the medium to long term. The price should clearly overcome the resistance at 20,899.
HSI in a bear market territoryFrom the peak at 22,792 in mid February this year, we are now seeing HSI entering into a bear market territory currently. Some said that the selling has been excessive and possibly a rebound is near the corner due to sellers' exhaustion.
Effective Sept 4 this year, we will see Country Garden being deleted from the HSI after missing payments on its bonds.
Since the epic of Evergrande declaring bankruptcy and shaken the world quite a bit, the Chinese government has been releasing "assuring words' of calming the economy and promised to shore up with stimulus packages. Here's the latest
The market is irrational and thus low prices can get lower and there will be investors who are afraid to catch a falling knife while some contrarians may view this as a good risk/reward ratio due to its excessive pessimistic view that many have on China market. Who's right and who's wrong? Only time will tell.
This property crisis has major consequences on consumers confidence. As I have mentioned before, majority of the Chinese place their savings/live savings on property as a major source of investments. This crisis will lead to them not wanting to pay up for their mortgages less to talk up buying new properties. This will affects the banks in China which are mainly state owned.
Plus, not announcing the updates on the youth unemployment only adds more anxiety to the people rather than eliminate their fear. When things are murky and uncertain, common sense will be to tighten your purse string and buy only the necessity and not spend on the want list.
With the continuous pressure coming from US on its tariffs and stringent trade policies, declining imports and exports, how can China then turn its attention towards building domestic market? Thus, I still hold the opinion that the CCP is still adopting a wait and see approach, releasing its piecemeal stimulus package to test the market.
Let's see how the market turns out later this week.
Going UPGood volume has arrived over the last 2 days. Not totally convinced that Long term bottom is in place but for next few days/weeks, HSI should make its way up towards the top of the parallel channel.
Resistance will come in at 17500, 18000, 18500 and 19000.
Expecting Oct 4 Low to Hold.Move down Today seems to be a breakout from the Triangle. I expect Oct 4 Low to hold and a strong move up towards 20k starts here.
Hang Seng Index: High-flyer 🌟The Hang Seng Index is currently in a strong rise. As the yellow trading range between 17 424 and 15 571 points has already been approached, it is quite possible that the low of the magenta wave alt.(2) has already been set. We give this scenario a 40% probability and it would become our primary scenario if the resistance at 18 898 points is broken. Until then, however, we must continue to expect that there will be another fall deeper into the trading range before the turnaround takes place.
Markets Keep Dropping: Is this Temporary or the Start of SomethiThe week stated with stock markets facing pressure due to a violent attack by Hamas on Israel.
The involvement of other players, notably Iran suspected of aiding Hamas, has raised concerns of a potential full-scale conflict, prompting the United States to dispatch a squadron of warships toward Israel. Consequently, global markets are grappling with heightened turmoil and uncertainty.
In just one week, oil prices appear to have retraced their steps to pre-September levels. However, this situation remains fluid and subject to rapid changes in the days ahead. OPEC+ recently convened an online meeting to evaluate the prevailing oil market conditions.
Following the meeting, no significant alterations were announced, as both Saudi Arabia and Russia opted to maintain production cuts until year-end. In an unexpected twist, Russia decided to lift its Diesel export ban, thereby increasing oil supply and exerting downward pressure on prices. Should tensions in the Middle East not escalate further, it's likely that oil prices may stabilize around the $80 mark.
A similar narrative unfolds for gold. Traditionally, precious metal prices tend to surge during times of conflict. However, the current environment, with high bond yields offering attractive returns, has rendered precious metals less enticing to investors.
Turning to economic data, despite the prevailing high interest rates, the economic system appears resilient. The evolving economic situation has become a focal point for investors. While some are hopeful for a crisis that might prompt central banks to lower interest rates, recent indicators suggest a different trajectory.
In the United States, the creation of 336,000 nonfarm jobs has been a positive development, and Europe is also reporting better-than-expected results.
Bitcoin the Solution?
Right now, Bitcoin is definitely one of the best assets to own.
Over the past seven months, dating back to mid-March of this year, Bitcoin's value has oscillated within the $25,000 to $30,000 range, leaving market participants uncertain about its future direction. However, there's a growing likelihood of multiple ETFs gaining approval, potentially opening the floodgates for Bitcoin investment and making it an attractive option for financial advisors seeking to diversify their client portfolios.
I maintain my investment in Bitcoin, with a particular focus on RIOT Platforms stock, which is closely tied to cryptocurrency production.
While historical patterns suggest that conflicts can lead to temporary market declines, I remain relatively unperturbed.
China
My investment strategy continues to revolve around the Hong Kong index, targeting major stocks at discounted rates.
Recent macroeconomic data reinforces the possibility of an economic resurgence in China by 2024. During the recent national holidays, China's domestic tourism earnings reached an impressive 753.4 billion yuan (approximately $103 billion), reflecting a 1.5 percent increase. These figures underscore the readiness of the Chinese populace to embrace life and engage in retail activities following the economic recovery.
Towards All Time HighStart Buying. HSI at the start of at least multi month may be even years of uptrend.
Strong reversal but resistance remainsThose who hit the bullseye below previous swing low can book profit around 19k.
Bottom not in yet. More consolidation and lower prices to come over the next few days/weeks.
HANG SENG: Buy signal on the bottom of the Channel Down.Hang Seng got rejected on the 1D MA50 two weeks ago and is headed again to the bottom of the Channel Down pattern. The 1D timeframe turned red again on its technical outlook (RSI = 41.280, MACD = -221.700, ADX = 20.498) and this is becoming a buy opportunity again. Every prior rise inside this Channel Down has been at least +10.90% so the one that started on the August 22nd low isn't technically completed. Buy and attempt contact with the 1D MA200 (TP = 19,400).
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Breakout imminentHsi can breakout from this consolidation any moment now. If it breaks down then going Long below the previous swing low at 17500 is a no brainer. Give your trade some room as they may try to hit the SL below 16800.
If it breaks up then we will have to watch the resistance to higher prices to determine if the market has bottomed and is starting a big move up or if more accumulation needs to happen.
Accumulation continues. Volume is highest between 18000-18500. This is where most of the buying is happening. Expecting consolidation for few days, maybe whole of this month.
Short term trend remains DownMarket back between the blue lines as expected. Selling and buying both strong so expect some zigzag. Lower prices to come.
Go Long below one of these 2 lows.Rally from here may very well go on to make the new ATH. Go Long below one of the 2 lows and hold onto this one.
Day Trading the Hang Seng IndexDay trading the Hang Seng Index...explanation of the two trades for the day and the price action that led to the setups.
I talk through my approach to Day trading and how I use the indicators along with how to Manage the Risk while in a trade.
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