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Tencent (700.hk) double top in Q1, neckline broken

Chart features

  1. Tencent is a ‘super’ stock. 6 bullish years from 2012 – 2017. In 2017 alone, it made a 116% gain.
  2. However it is trading in the red this year. At the moment it closed at 385, below 408 opening price at beginning of year.
  3. Highest transacted was 476.6 so this stock is now 19.22% off the top.
  4. In the first chart at weekly time frame, we can see price printed at Double Top reversal in Q1. Neckline coincides with year open at 408. Neckline was already broken so bearish reversal chart pattern confirmed.
  5. I use a set of exponent moving average roadmap consisting of 13-week, 26-week, 52-week and 104-week ema which is equivalent to quarterly, half-yearly, yearly and 2-year trend.
  6. Based on visual inspection of data from 2014 till present, Tencent is super responsive to this  roadmap.
  7. 2017 was a year with very strong trend so price bounced like a feather off the 13-week ema (red).
  8. This year however, price is now below both 13-week and 26-week (blue) ema.
  9. Last major correction was late 2016 which price bounced off the 52-week line (green). If this roadmap is still useful, we might see potential support if price drops to green.

    Tencent weekly chart mid-2013 to May 2018

    Tencent weekly chart mid-2013 to May 2018 | Source: Tradingview.com

  10. In the second chart at daily timeframe, I use a more conventional moving average roadmap consisting of 20-day, 50-day and 200-day exponential moving averages.
  11. Double top is clearly visible, price now below neckline.
  12. Price is also below both 20-day (red) and 50-day (blue) ema.
  13. There was a dead cross.
  14. There may be a potential support at 200-day ema which we can see there was a bounce off this line last week.
Tencent daily chart from 2017 to present

Tencent daily chart from 2017 to present

Summary

  • Short term measures show Tencent reversal and in downtrend. There might be some potential support coming at 200-day or 52-week ema but has to be verified by price action.
  • 408 which is Tencent’s opening price at beginning of year plays an important milestone or as a sentiment indicator. Until 408 is recovered, this stock will stay in the red and the pattern for last 6 bullish years might be terminated.
  • If there is a firm lid on price already, then we will have to find out where bottom is since the current price momentum is down.
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Director, TerraSeeds Market Technician Pte Ltd. Trader, investor. @sohtionghum was picked ‘Top 70 Forex Twitter in 2015’. Operates multiple strategies.

“Dear reader, I do not have a financial license to give advice. I do not know you the reader. Your financial objective and risk tolerance may be different from mine. I am not responsible for any consequence of your action.

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