Hang Seng Index Looking Likely to Start a New Bullish Move

Summary:

The Hang Seng index is starting is looking bullish after weeks of a strong downward move. The Index likely to gain over 10 percent.

The Hang Seng index is starting is looking bullish after weeks of a strong downward move. The Index is also likely to gain over 10 percent of its value in its next bullish move.

What is Hang Seng Index?

Hang Seng is a weighted index of the top 60 Hong companies based on their market capitalization that trade on the Hong Kong Exchange (HKEx). The Index has become a benchmark for blue-chip stocks traded on the Hong Kong stock exchange in recent years.

The Index is made up of four sub-sector indices; industry, finance, utilities, and real estate investment trusts. It also uses a free-float market capitalization market weighing scheme when determining which shares should be on the Index. The Index is also classified as a price index with no adjustments made for cash dividends and warrant bonuses. Although the Index targets 60 stocks, there are times when it compromises more than and less than the stipulated stocks. For instance, in December 2021, the Index comprised 64 stocks. To remove a stock, a committee is required to convene quarterly and evaluate the index components.

Hang Seng’s share price today touched the lower trendline of the descending channel. The channel formation started on October 21, 2021, and since then, the Index has lost over 15 per cent of its value. Today, the markets for the Index opened at 21879 and have since gained 2.5 per cent to trade at the current prices of 21905.

Looking at the daily chart, the prices are poised to bounce from the lower trendline of the descending channel. This will start a new bullish rally. Although the general market trends will still be bearish-biased, the current bullish push is likely to see Hang Seng gain more than 10 per cent from its current prices. However, if the prices break past the lower trendline of the descending channel, then my trade will be invalidated. It will also mean the prices are likely to move downward aggressively.