RSI approaches 80! Analyzing the short-term pullback risks behind CNOOC's new high

$CNOOC (00883.HK)$ Entering 2026, the energy sector in the Hong Kong stock market has become the market's focus, with China National Offshore Oil Corporation (00883) showing particularly strong performance. Recently, driven by multiple favorable factors, the company’s share price has continued to climb and broke through HKD 25.04 intraday today (January 28), once again setting a new all-time high since its listing. Behind this strong rally are both short-term momentum brought about by sudden events and long-term confidence in the company’s fundamentals. This article will analyze the current market situation for investors from perspectives such as market drivers, technical trends, and key price levels, incorporating insights from 'HKEX Podcast,' and provide analysis ideas on related warrant products.

I. Market View: Long-term logic gains market consensus

Regarding the future outlook of CNOOC, the market generally holds an optimistic attitude. The January 21 episode of the 'HKEX Podcast' pointed out that some investors are bullish on CNOOC’s prospects in the long run and discussed strategies to add positions during pullbacks. The analysis suggested that, based on technical signals at the time, there was mainly a 'buy' signal in the short term, advising investors to pay attention to support around HKD 21.3. For a more conservative approach, they could wait for the stock price to retreat to near HKD 20.8 before considering action. This view aligns with the current market judgment of the long-term value of energy stocks.

II. Technical Analysis: Facing Overbought Conditions After Reaching New Highs, Analysis of Key Support and Resistance Levels

As of January 28, the share price of CNOOC was at HKD 24.7, surging by 4.93%. The 14-day RSI indicator has risen to 79, entering a severely overbought zone. This indicates that after consecutive highs, the stock has accumulated substantial profit-taking pressure in the short term, with increasing technical correction risks. Nevertheless, its medium- to long-term technical outlook remains strong. AASTOCKS previously analyzed that CNOOC’s price chart shows a 'Head and Shoulders Bottom' pattern with an upward breakout, which is a classic bullish technical signal, suggesting a favorable mid-term trend. Currently, the stock price is firmly above all major moving averages, with the moving average system showing a bullish alignment, providing fundamental support for future movements.

Based on current data and earlier analysis from the *HKEJ Podcast*, we can outline the following key price levels:

* Immediate Resistance (R1) and Core Resistance (R2): Since the stock price has reached new historical highs, there is no significant historical resistance overhead. The first technical resistance level can be referenced near HKD 26.1, while stronger resistance lies around HKD 27.4. Any further increases will open up new price ranges.

* Immediate Support (S1) and Key Support (S2): The first support below is near HKD 22.9, close to the 10-day moving average (HKD 22.65), which is also the recently broken consolidation platform. More critical support is located at HKD 22.1, where the 30-day and 60-day moving averages converge. This level is near the upper boundary of the HKD 21.3–20.8 support zone mentioned earlier by the *HKEJ Podcast*, and is expected to see defensive action from bulls. If this area is breached, the uptrend may face a deep correction.

III. Derivatives Review: Leverage Effect of Warrants Highlighted During Strong Market Trends

When the underlying stock exhibits a clear trending move, related derivative products often deliver significant volatility returns. Reviewing the products mentioned on January 26, their performance over the next two days serves as evidence. As CNOOC’s stock rose by 6.34% in two days, related warrant products significantly outperformed the stock: UBS Call Warrant (29920) $UBCNOOC@EC2611A.C (29920.HK)$ rose 49%, BOC Call Warrant (28139) $BICNOOC@EC2611A.C (28139.HK)$ rose 41%, while Societe Generale Bull Certificate (64301) and UBS Bull Certificate both recorded gains of 38%.

IV. Product Terms Analysis and Current Market Match

At a time when stock prices have hit new highs and technical indicators are overbought, investors considering using derivative products like warrants must closely link the terms of the product with key price levels of the underlying stock and understand the characteristics of different products. Call warrants, without a mandatory recall mechanism, are suitable for investors willing to pay the time value cost in anticipation of continued upside in the underlying stock. For example, UBS call warrant (23036).$UBCNOOC@EC2605A.C (23036.HK)$The exercise price is 28.52 yuan, significantly higher than the current stock price, with an actual leverage of about 8.9 times. This product is ideal for aggressive investors who believe that the stock price can break through the resistance at 26.1 yuan and move towards 27.4 yuan or even higher levels. The BOC call warrant (22522) has similar terms.$BICNOOC@EC2607A.C (22522.HK)$Its exercise price is 28.9 yuan, with leverage of around 7.8 times. Choosing such deep out-of-the-money warrants implies a high expectation for short-term gains in the underlying stock, but also comes with correspondingly higher risks.

In contrast, bull and bear contracts have a forced recall price, making them less affected by time decay, though they carry the risk of early termination if the underlying asset hits the recall price. For investors optimistic about the market outlook, currently, only bear contracts are being recommended, reflecting the view of some issuers or market participants that the probability of a short-term pullback has increased. For instance, UBS bear contract (68106), with a recall price set at 27 yuan, slightly above the key resistance level of 27.4 yuan. This suggests that if investors believe it will be difficult for the stock to break through the 27.4 yuan resistance level amid the current overbought condition, and may instead adjust downward, this bear contract offers a highly leveraged (9.6 times) tool for bearish bets. The setup of the recall price and resistance level provides some margin of safety, but close attention must be paid to whether a strong breakout could lead to its recall.

What do you think CNOOC's next move will be after hitting a historic high?

A. Continue to rise

B. Short-term pullback

C. High-level consolidation

Feel free to share your choice in the comments section, or follow 'HK Warrants Jenny' for more warrant analysis.

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This article does not constitute any investment advice

This article is for reference only and does not constitute any investment advice. The market data, opinions, and analysis contained herein may change at any time without prior notice. We shall not be liable for any loss or damage arising from reliance on the information in this article. Technical analysis merely indicates whether certain technical conditions are met; a comprehensive evaluation of asset performance should incorporate additional data. Trading decisions should not be based solely on the content of this article. Please note that past performance is not indicative of future results.

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