Tencent (700:HK): Distribution Phase in Progress


Tencent is well-receive by investors, analyst and fund managers. Following table shows the strong convictions by most analysts on Tencent. Source: Reuters.



However, market demand and supply situation is suggesting otherwise. Demand is diminishing since late 2017 and supply starts to overwhelm demand beginning Apr 2018. Today, we saw Tencent broke down below significant support HKS$375.00, Sign of Weakness (fall through the ice). 

 Tencent is relatively weaker than market as shown in our proprietary RS indicator. Fund Flow Index (FFI), which indicates fund flow is below zero, meaning flows are flowing out of Tencent. Lastly MACD continues to trade in bullish manner. 

 Thus, we are expecting Tencent to breaks further with first objective at HK$340-350 zone.

 Trading is no different to any other merchandising business as shared by Mr Wyckoff, we all reads the demand and supply conditions and react accordingly. 

 Distribution zone is simply a zone where demand diminishes and overtaken by Supply. By learning to identify these characteristics, it helps traders to understand the situation and trades in harmony with the markets. 

 I always remind myself that I'm not trading the stock, but trading the demand and supply of the stock.

 Cheers.

Popular posts from this blog

Eventful Week: FOMC Decision and Earnings Reports Headline Upcoming Week

Image
  Eventful Week: FOMC Decision and Earnings Reports Headline Upcoming Week The week ahead is shaping up to be a busy one for the markets, with the Federal Open Market Committee (FOMC) meeting and earnings season taking center stage. The FOMC is widely expected to raise interest rates by 25 basis points on Wednesday, in an effort to combat inflation. This will be the first rate hike after June's pause, and investors will be closely watching the accompanying statement for any clues about the pace of future rate hikes. Earnings season is also in full swing, with more than 100 companies in the S&P 500 scheduled to report results this week. Investors will be looking for signs of how companies are weathering the current economic and geopolitical challenges. In the meantime, China markets appear to be stabilizing, with the yuan holding steady against the dollar below 7.25 and KweiChow Moutai (600519), a vital component of the China A50 index, which displays strength by breaking out
Read more

Markets searching for technical support

Image
  Thoughts on Week Ahead: Week 21 Aug 2023 Markets searching for technical support US FOMC minutes have confirmed market’s fear of a hawkish US FED. This fear has triggered a continued sell-off in global equities over the past week. China economy and policy did not help too much either. China Evergrande filed for chapter 11 in US while Country Garden future remain uncertain as investors continue to keep an eye for a more aggressive policy from Beijing to support the economy and people’s confidence. From a technical perspective, markets are searching for technical support levels, where bargain hunters are willing to come in. Support levels are 4,300 for S&P 500 and 3,130 for STI. For the week ahead, market participants will be zooming in on US FED Chair Powell’s speech at the Jackson Hole meeting.  We did not uncover trading (tactical) set up for the week ahead and will update once we identify any. Have a great trading week ahead.  Headlines for Week Ahead: Key corp earnings (Nvidia
Read more

Wyckoff's Law of Effort

Image
Law of Effort Wyckoff's Law of Effort states that on any single trading day (or week depending on time frame), huge volume (effort) push by participants should see huge price movement, resulting in a wide spread (long body). This is a basic principle of effort and result. However, as per Singtel's case study, we saw huge selling volume on 11 May, yet the price action only shows a narrow spread (small body). This divergence of effort and result in Wyckoff's Law of Effort principles, indicates possible exhaustion in selling or hidden buying. Thus, with a lack of weakness, Singtel should continue trading range bound for the coming days or weeks till further strength or weakness is observed. Swing Traders who trades range can consider positions at 3.70-3.72, with exit target 3.76-3.78.
Read more