Hang Seng Index crashes to key support level: will it hit H$20,000?

The Hang Seng Index retreated by over 2% on Monday as Asian stocks dived amid the ongoing energy market shock. It retreated to a low of H$25,100, an important support level that was much lower than the year-to-date high of $28,000.

Hong Kong stocks plunge as the energy shock continues

Chinese stocks continued falling on Monday, with the China A50 and Shanghai Composite falling by over 2%. Asian indices like the Nikkei 225, Nifty 50, and Kospi dropped by over 5%.

The same trend happened in Europe, where futures tied to the FTSE 100, DAX, and CAC 40 indices dropped by over 2%. Similarly, Dow Jones, Nasdaq 100, and S&P 500 futures dropped by over 2%, their worst performance in months.

The Hang Seng Index is falling because of the ongoing crisis in the Middle East, which has pushed energy prices substantially higher in the past few months. Brent, the global benchmark, was trading at $116, while the West Texas Intermediate (WTI) rose to $115.

Hong Kong and mainland China are exposed to the developments in the Middle East because of the vast amount of oil they import from the region. On the positive side, China has millions of barrels of oil in storage, which explains why its indices are falling at a slower margin than its counterparts.

The Hang Seng Index also retreated as investors watched the developments at the ongoing developments at the National People's Congress (NPC), where officials are sharing their plans for the year. In a statement last week, Beijing placed a target growth for the year to between 4.5% and 5%.

Most Hang Seng Index companies were in the red. The Sun Hung Kai Properties stock price dropped by 6.55% on Monday, while Techtronic fell by 6.22%. Geely Automobile, Hang Lung Properties, CITIC, CK Hutchinson, AIA Group, and Zijin Mining stocks tumbled by over 5%.

Only five companies in the Hang Seng Index were in the red today, and most of them are in the energy sector. CNOOC, China Shenhua Energy, and PetroChina stocks rose by over 3% as crude oil and energy prices surged.

Hang Seng Index technical analysis

The daily timeframe chart shows that the Hang Seng Index peaked at $28,052 in January this year. It dropped to the key support level at $25,060, a notable level that coincided with the lowest levels in October, November, and December last year.

The index has moved below the 23.6% Fibonacci Retracement level at $25,965. It has also moved below the 50-day Exponential Moving Average (EMA).

The Relative Strength Index (RSI) has dropped from the overbought level of 73 to the current 36. Other indices like the MACD and the Stochastic have continued moving downwards.

Therefore, the Hang Seng Index will likely continue falling, potentially to the psychological level at $24,000. It will then bounce back as signs of the war ending rise. 

Indeed, the falling US stock market may push Trump to reduce the scope of the war and possibly capitulate.