Hexun Investment Advisor Feng Lushun: On March 24, how will the Hang Seng Tech Index move next?

On March 24th, let’s analyze the trend of the Hang Seng Tech Index. Today, the Hang Seng Tech experienced a volume-contracted rebound, but can this rebound continue? Can it form a bottom and start moving upward? We analyze this through volume and price relationships.

First, from a time and space perspective, the Hang Seng Tech has been adjusting for over half a year, with a decline of 30%, showing bottoming characteristics. At the same time, there has been a bottom divergence in the past two days — the stock price hit a new low yesterday, but the indicator did not make a new low, which is a typical bottom feature. However, after meeting bottom characteristics, it also needs to show a golden cross of the 5-day moving average over the 10-day, and MACD turning positive. Currently, MACD has turned positive below the zero line, so the rebound strength is limited.

So, is the daily chart at a bottom? According to Gann theory: Gann has four lines, two upper and two lower. When the price hits the lower limit, it rebounds; when it breaks above the upper limit, it falls back. Currently, the index has broken below the lower limit and is rebounding today. If it breaks below the lower limit again and the stock price makes a new low while the indicator does not, it will form a bottom divergence, which could trigger a new low rebound. Therefore, at this stage, there is no fear of making a new low — as long as a new low occurs, a rebound will follow. In terms of trading strategy, buy on dips when a new low occurs; if no new low is made, and the rebound begins, the index needs to rise above the 5-day moving average to achieve a golden cross of the 5-day over the 10-day and for MACD to turn positive. If it remains below the 5-day moving average, the performance is weaker.

According to wave theory: Wave 1 up, Wave 2 correction, Wave 3 main rise. The key to Wave 3’s main rise is breaking through the high of Wave 1. If it cannot break through Wave 1’s high, it remains in Wave 2 correction. Conservative investors can wait until the high of Wave 1 is broken before acting; aggressive traders can trade the difference — enter at new lows, and if the rebound cannot push above the 5-day moving average, sell high.

Currently, bottom trading in the Hang Seng Tech is quite challenging. It is recommended to wait until the high of Wave 1 is broken before taking action.

(Edited by: Zhang Yan)

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