Hang Seng Index is rising today: is this a bull trap or start of a rally?

The Hang Seng Index jumped by 1.4% on Tuesday as global stocks soared after the latest developments on the ongoing Iran war. It jumped to H$ 24,630 from this week's low of H$24,215. So, is this a dead-cat bounce or the start of a bull run?

Hang Seng Index jumps amid signs of Trump's capitulation 

Chinese stocks rose on Tuesday, mirroring the performance of other global indices. In the United States, the Dow Jones Index jumped by over 600 points, while the Nasdaq 100 and S&P 500 jumped by over 1%.

The performance was primarily because of Donald Trump's change of tune on Iran. In a statement, the president said that he had deferred bombing of Iran's power plants after the talks between the US and Iran. 

Still, analysts are cautious about the statement as Iran denied these claims. Also, the statement came before US markets opened, meaning that Trump was attempting to lift equities and lower energy prices. Iran has continued to shut the Strait of Hormuz.

Therefore, there is a likelihood that the Hang Seng Index and other global indices may retreat. Indeed, futures tied to the Dow Jones, S&P 500, and Nasdaq 100 indices dropped by over 1%. European indices, which jumped on Monday, also resumed the downtrend. 

Crude oil prices also resumed the uptrend, with Brent, the global benchmark, rising to $100. The West Texas Intermediate (WTI) jumped to $95. 

Most companies in the Hang Seng Index were in the green on Tuesday. WuXi AppTec stock jumped by 8.8%, while Laopu Gold jumped by 7.7% after reporting a 220% revenue and profit jump.

The other top gainers in the Hang Seng Index were companies like AIA Group, China Resources Beer, Zijin Mining, CMOC Group, BYD, and Lenovo Group, which jumped by over 4%.

On the other hand, only a few companies were in the red, including Sinopharm, Contemporary Amperex, Xinyi Solar, and CNOOC. All these stocks dropped by over 1.50%.

Looking ahead, the Hang Seng and other global indices will react to the new developments in the ongoing Iran war. Signs that the war is ending will be bullish for the stock market. This, however, will depend on the statements by the US, Iran, and Israel.

Hang Seng technical analysis

HSI stock chart | Source: TradingView

The daily chart shows that the Hang Seng Index has retreated from the year-to-date high of H$28,050 in January to the current H$24,765. It recently dropped below the important support level at H$25,060, its lowest point in the last three months of the year.

The index has dropped below the 50-day and 100-day Exponential Moving Averages (EMA). It is hovering at the 38.2% Fibonacci Retracement level and is slightly below the Supertrend indicator.

Therefore, the short-term Hang Seng Index outlook is bearish, with the initial target being the psychological level at H$24,000. A move below that level will point to more downside, potentially to the 50% retracement point at H$23,685.