The Hang Seng Index rose 144 points to close at 24,175 on Friday, marking a weekly gain of 825 points or 3.53%. The Hong Kong stocks benchmark exhibited an alternating pattern last week, with gains on Monday, Wednesday, and Friday offset by corrections on Tuesday and Thursday. The index formed a perfect short-term uptrend over seven consecutive trading days starting July 2, with the 5-day moving average crossing above both the 10-day and 20-day lines within three trading days, signaling a technical bottom. This recovery follows two months of significant declines in the Hang Seng Index.
Hang Seng Index Returns to Charted Territory with Technical Bottom Confirmation
The Hang Seng Index has returned to "charted territory" from the "uncharted territory" referenced on June 29. The EJFQ system's TrendWatch channel, calculated using one standard deviation, initially showed a downtrend beginning April 2 and backdated to January 29. The latest chart data reveals the TrendWatch downtrend channel starting point has been pushed back to May 14. The 5-day moving average crossed above the 10-day line and subsequently the 20-day line, with only three trading days separating these short-term "golden cross" formations.
TrendWatch Downtrend Channel Shows Easing Slope as Index Breaks Upper Boundary
The TrendWatch downtrend channel's central axis level rose from 23,000 points to approximately 23,080 points as of July 10 on a weekly basis. The EJFQ system's TrendWatch channel integrates multiple default data calculations, and the July strength in the Hang Seng Index has compressed the downtrend length. The channel's central axis has been rising since June, though the increase remains slight. The Hang Seng Index currently trades above the channel top, with the channel being "lifted" as the downtrend slope eases.
Market Indicators Show Reduced Selling Pressure Despite Weak Buying Momentum
The EJFQ strong stock index, which reflects buying momentum in strong stocks, declined from 21.7% to 20% over the past week. The weak stock index, reflecting selling pressure in weak stocks, fell for five consecutive sessions from 53.1% to 28.6%, dropping below the 40% "exuberance zone" threshold on Wednesday and reaching its lowest level since mid-May. The index's rise last week was primarily driven by significantly reduced selling pressure rather than active buying.
Northbound Capital Inflow Exceeds HK$39 Billion as AH Premium Reaches Year High
Northbound capital recorded net inflows exceeding HK$39 billion last week. The AH share premium index rose to 124.5, marking the highest level this year. Charts show these capital flow patterns coinciding with the index's technical recovery.
Trading Strategy Details
The columnist added long index positions by buying 23,435-point current month futures after observing the 5-day moving average breaking above the 10-day line, while already holding a 23,400-point short put with 530 points of option premium. Subsequently, due to the strong stock index failing to provide support, a 24,400-point current month call was sold, collecting 435 points of option premium, forming a "short strangle" with the 23,400-point short put as a hedge for the long futures position.
FAQ
What caused the Hang Seng Index to rise 825 points last week?
The Hang Seng Index rose 825 points or 3.53% last week, closing at 24,175 on Friday. The rise was primarily driven by significantly reduced selling pressure rather than active buying momentum. The weak stock index fell to 28.6%, its lowest level since mid-May, indicating diminished selling pressure, while the strong stock index only declined slightly from 21.7% to 20%.
What technical indicators confirm the Hang Seng Index has formed a bottom?
The Hang Seng Index formed a perfect short-term uptrend over seven consecutive trading days starting July 2, creating higher highs and higher lows. The 5-day moving average crossed above both the 10-day and 20-day moving averages within three trading days, forming short-term "golden cross" patterns. The TrendWatch downtrend channel's central axis rose from 23,000 points to approximately 23,080 points as of July 10, with the index breaking above the channel top.
