Hang Seng index doji points to more upside if it clears this price

The Hang Seng index popped by more than 3% as real estate stocks soared. The index of blue-chip Hong Kong and Mainland China companies jumped to a high of H$18,762, higher than this month’s low of $17,943. Other Asian indices like the Nikkei 225, Shanghai Composite, and Taiwan Weighted also drifted upwards.

Real estate stocks lead

The Hang Seng index soared after the strong performance of American equities. Key American indices like the Dow Jones, Nasdaq 100, and S&P 500 jumped by more than 1% on Thursday after the US House of Representatives voted for the debt ceiling deal. Overnight, the Senate did the same, meaning that the US will not default on its obligations.

A closer look at the top Hang Seng index movers shows that most of them are in the real estate sector. Longfor Properties shares jumped by more than 10% on Friday even as the real estate sector in China continued slumping. The most recent data shows that the recent rebound in home purchases has started fizzling out.

Country Garden Services and Country Garden Holdings stock prices jumped by 10.2% and 6.57%, respectively. Other companies like China Resources Mixed Lifestyle, Wharf Real Estate, Hang Lung, and China Resources Land also saw their shares jump by over 5%.

Hang Seng’s technology stocks also did well, following the cue from their American counterparts. Alibaba stock price jumped by more than 5.82% while Baidu, JD, and Tencent jumped by over 4%. 

Despite the gains, the Hang Seng index has underperformed its Asian, European, and American peers this year as concerns of China slowdown continue. The index has dropped by more than 10% this year while the other global peers are up by double-digits. This performance is mostly because of the slow recovery of the Chinese economy.

Hang Seng index forecast

Hang Seng chart by TradingView

The Hang Seng index has been in a bearish trend in the past few months after it peaked at H$22,812 in January this year. In all, it has dropped by over 17% from its highest point this year. Along the way, the index has moved slightly below the 25-day and 50-day moving averages. It is also attempting to retest the crucial resistance point at $18,883, the lowest level on March 20th.

A closer look shows that the index has formed a small doji pattern. In price action analysis, this pattern is usually a bullish sign. Therefore, more upside will be confirmed if the price moves above the resistance at $18,883. A break below this week’s low of $18,000 will signal that bears have prevailed.