- The Hong Kong 50 index initially rallied during the early hours on Tuesday but has given back the gains at the 19,000 Hong Kong dollars level.
- We are currently in the midst of consolidating right now, and it'll be interesting to see how this plays out because we had shot straight up in the air, but now we are approaching an area that previously had been significant resistance. You could even make an argument that the area had been a bullish flag previously, so it'll be interesting to see what the order flow does to what happens here. Underneath that, we have the 18,000 Hong Kong dollars level, which becomes a lot more interesting as the 50-day EMA is starting to approach that area. A lot of this is going to come down to how people feel about growth in general and of course China.
China Play?
With that being the case, it is a fluid development, but you can make an argument for a lot of different reasons to believe that sooner or later, the traders will come in and try to take advantage of some type of pullback. From the surge higher in the middle of last month, we have pulled back to roughly the 23.6% Fibonacci retracement level. The 50% Fibonacci retracement level is at the afford mentioned 18,000 Hong Kong dollars level. And it's an area that not only is a large round number, not only does it have the 50 day EMA, but it's an area that was important previously. So, if we can get a pullback to there, it could represent good value for traders looking to ride what has been massive momentum. Either way, there's literally no way to short this right now. It's far too bullish. This of course will be exacerbated by the idea that China is starting to recover a bit, and as long as that is going to be the case there will be a bit of a “knock on effect” throughout Asia, especially Hong Kong.