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.