Show me the Chart and I'll tell you the News, Part 1 - Thomas Ng memo 5 Apr 2023
Updated: Apr 6
Words of wisdom from a Legend
Image source: Twitter
On Wed 5 April 2023 12 noon, I emailed Clients my latest post titled 'Show me the Chart and I'll tell you the News, Part 1'.
Below is the full transcript for your perusal:
'Dear Clients .
Let's take a break from our beloved S&P500 Index (aka SPX) today as we peer into 4 other interesting sectors/stocks. Well, in any case, I still expect SPX 4312 to be an attainable target for the next few weeks/months for reasons explained in my previous writeup on 12 March. (ref https://tinyurl.com/sobaditsgd)
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On 5 Feb 2023, I talked about the following 3 different assets under the heading 'Seven more technical factors to add to the Risk-on bias' (ref https://tinyurl.com/riskison). An excerpt as per below:
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'QQQ (Nasdaq 100 ETF) is sporting a potential Double Bottom pattern with a breakout on 1 Feb. As with all breakouts, the backtest must hold.' 'The Crypto complex is starting to stir which implies a stronger risk-on environment.' 'Even Hang Seng Index (HSI) appears to be preparing a bullish Inverse Head & Shoulders Pattern which if triggered at neckline 22,608+/- will point to a pattern-implied target of 30,435+/-. That's a 36% upside from the neckline. Phew!'
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Let's review each of them and see where they are now: .
QQQ (Nasdaq 100 ETF): Pls see below Chart 1.
After price breaks out on 1 Feb from the Double Bottom Formation, the subsequent back-test to its neckline was successful with a low recorded on13 Mar. Since then, price has been on a steady uptrend.
The initial Double Bottom Formation has a pattern-implied target at 327. With the new bullish Flag pattern in place, the new implied target is now at 353. Friday (31/3) closed 320.93, buy on weakness. For stops, pls drop me a line.
Chart 1 - QQQ (Nasdaq 100 ETF) Daily, 1-year Chart
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BTC (Bitcoin): Pls see Chart 2.
If you want to know whether the world has truly gone Risk-On or not, look no further than Bitcoin & Ethereum price action.
The failure of FTX & crypto banks appears to have marked an end of a chapter of the ra-ra days of the Crypto Complex, rather than prolonging the pain. Despite all the Crypto shenanigans of the past year which were generally man-made, do note that the fundamental Blockchain technology behind Bitcoin & Ether was not compromised at all.
The Inverse Head & Shoulders formation as shown is a typical bullish bottoming pattern. Once price action breaks out of its neckline at ~25,000, the pattern implied target is at 34,566+/-. A backtest (or pullback to the neckline) is still possible.
Chart 2 - BTC (Bitcoin) Daily, 11-mth Chart
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Hang Seng Index (ETF equivalent is the Tracker Fund 2800.hk listed in HKex): Pls see Chart 3.
As you may see, the right shoulder (in blue) of the bullish Inverse Head & shoulder Formation is slowly but firmly shaping up. As mentioned on 5 Feb 2023, if price action breaks above sustainably above the neckline at 22,608+/-, the implied target will be 30,435+/-. That's a 36% upside from the neckline.
IMHO, the thrust of new developments such as in Alibaba's announcement to split into 6 'Ali-babies' is probably the clearest sign of Chinese Govt support on its Tech champions.
I like to use the idea that one should always pick oneself up from where you fell from, and said announcement from Alibaba fits this idea to a T.
So if you are bullish on China/Hk now for reasons above or otherwise, the million dollar question is whether you should take a position now OR only when price crosses that neckline authoritatively. Drop me a line to pick my brains!
Chart 3 - Hang Seng Index (HSI, equivalent ETF is Tracker Fund 2800.hk) Daily, 3-year Chart
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Bonus stock idea - TENCENT (700.HK), listed in HKEx:
Tencent is arguably the most influential internet firm in China as one can hardly go by a day without using its products. Tencent is the world's largest video game vendor and owns the world's top-grossing mobile game - Honor of Kings. Tencent also runs China's largest social media super app - WeChat. The app is now part of the fabric of life for Chinese people who use it to chat, shop, watch videos, play games, order food and taxis, and more. Equally as impressive as its own portfolio, Tencent is also among the world's largest venture capital and investment corporations. The firm is now one of the largest shareholders in leading tech companies like Meituan, JD, DiDi, Snap, PDD, Kuaishou, Epic Games, and more.
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Since China ditched its zero-covid policy and cited its pro-economy stance, Tencent’s share price had almost doubled from its low of $190 in November 2022 to a high of $415 in January this year. On 22 Mar 2023, it reported surprise profit growth, lifted by digital-ad recovery.
Management had declared 2022 final dividend of HK$2.40 per share vs HK$1.60 per share in 2021. In case you aren't aware, since 2010, Tencent had increased its dividend payout by 24x.
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From Chart 4, Tencent is sporting an immense bullish Inverse Head & Shoulder Formation, similar to the Hang Seng Index (HSI) as discussed above. This should not come as a surprise since Tencent's weighting in HSI is close to 9%, so HSI's fortune is inextricably linked to Tencent.
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Its current price action is hanging just right there at its breakout neckline. An authoritative break out northwards will suggest a pattern-implied target of HK$595.
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The pattern-implied target HK$595 is slightly higher than most of the Investment Banks' newly upgraded fundamental price targets. Pls see below for a compiled list of new price targets (new target price on right side), together with the Investment Banks' headline reasons for upgrade:
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Brokers│Ratings│TPs
Citigroup│Buy│496->520 Nomura│Buy│510 CLSA│Buy│500 BofA Securities│Buy│474->496 Haitong International│Outperform│487 CICC│Outperform│475 Credit Suisse│Outperform│461 UBS│Buy│460 Jefferies│Buy│456->460 Macquarie│Outperform│453 Morgan Stanley│Overweight│450 Goldman Sachs│Buy│434->447 HSBC Global Research│Buy│440 CCB International│Outperform│400.9->423
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Brokers│Headline Views
Citigroup│On track to deliver stronger sustainable growth and shareholder returns Nomura│Quarterly revenue in line with estimate-missing earnings CLSA│Growth resumed BofA Securities│Multiple growth engines to propel growth and expand profit margins Haitong International│Businesses expected to regain acceleration momentum this year CICC│Significant growth recorded; crucial to capitalize on recovery momentum Credit Suisse│Quarterly results in line; full-fledged development expected across all business segments this year UBS│Revenue and earnings recovery driven by product monetization Jefferies│Rating reiterated at Buy based on multiple upcoming business growth drivers Macquarie│Poised to hail growth Morgan Stanley│Outlook positive across all business segments Goldman Sachs│Quarterly results beat with strengthened visibility on earnings acceleration HSBC Global Research│Recovery in game and advertising segments further confirmed CCB International│Selected as sector top pick based on its solid performance
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Lastly, there is an important catalyst to note, known as the 'Golden Shares' initiative: https://www.reuters.com/technology/china-moving-take-golden-shares-alibaba-tencent-units-ft-2023-01-13/
The tide looks to be turning for China’s tech giants when it is recently reported in January that China’s Cyberspace Administration had purchased “Golden Shares” in Alibaba (9988) and it is rumoured to have plans to do the same for Tencent (0700) as well. “Golden Shares” are shares that grant special voting rights and in this case, give the Chinese regulators a board seat in the tech giants. To the Western economies, this may seem like a negative to have government poking around their businesses. But in China context, this is good news as it aligned the interest of the Chinese government with the companies. Especially for Tencent, which requires the regulators to grant them the licenses necessary for its businesses.
Chart 4 - TENCENT (700.hk) Daily, 2.5-year Chart . . Conclusion in Layman's terms: 1. 'Show me the Chart and I'll tell you the News'. The price action of the above assets I brought forth to your attention in early Feb is moving pretty much in line with my script.
I guess you can call me the ChartWhisperer! :)
. 2. Double Bottoms & Inverse Head & Shoulders Formations are important bottoming patterns. You can easily google their definitions at Investopedia, etc.
. 3. If you wish to find out why such basing formations such as those described above works, you should take a look at a certain Technical Analysis school of thought called the Wyckoff method.
. 4. It is with no doubt I have a bullish bias. However, having an opinion on what Mr Market should do DOES NOT mean I get to decide what Mr Market WILL DO. This is where stops come in, whether you are a long or short term investor/trader. Drop me a line on how to assess good stop levels. .
5. I will be writing soon a Part 2 which will likely cover Gold (GLD ETF listed in SGX), Bonds (TLT ETF listed in Nasdaq) & Lion-OCBC HS Tech Index (listed in SGX) and possibly other interesting & curated stocks. .
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Til then, Live Long & Trade Well!
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Thank you & regards
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Thomas Ng, CMT
Principal Trading Representative 首席股票经纪
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#plsreaddisclaimer #chartforillustrationonly #spx5apr23 #showmethechart #tellyouthenews #QQQ #BTC #HSI #TENCENT #doublebottoms #inverseH&S #bullish #befluid #wytant #livelongandtradewell
Chart source: tradingview
Image source: twitter