From a price action perspective, Tencent looks primed to make its next leg up. Firstly, price has found support on a bullish
trendline formed in late 2018 that has been tested and held multiple times. Secondly, price has bounced off the weekly 200 day MA, as it has done previously in March 2020 and October 2018, with a high level of accuracy. Thirdly, price has made a 0.618 Fibonacci retracement
, a key reversal level, from its October 2018 lows. Moreover, the RSI
is showing oversold levels but more importantly is showing bullish divergence
. Taken together, a trader may have a high level of bullish
conviction based on these technicals - it really does look like a textbook move.
Despite this, from a fundamental perspective, Chinese tech stocks are under a massive amount of pressure from the Chinese government over monopoly concerns. Cathie Wood of ARK invest recently liquidated large amounts of holdings in Chinese tech stocks. Other Chinese tech stocks like Alibaba and Baidu
have also recently suffered a deep slide in their share price.
Should the regulatory concerns blow over, this set up presents a very attractive reward. However, the fundamental risks must not be ignored and still present a very real threat to the stock price.