Tencent hits a new yearly low, is the time to position ripe?

Continuing the recent weak trend, the stock price once dropped to a low of 476 yuan, hitting a new low for the year. The current stock price has clearly fallen below all major moving averages, including the 10-day line (518.69), the 30-day line (524.5), and the 60-day line (563.41), confirming that the short-to-medium-term downward trend is still ongoing. However, it is worth noting that the 5-day volatility reached 6.9%, indicating increased market fluctuations and fierce competition between bulls and bears.

An in-depth analysis of key technical signals shows that the market exhibits typical 'oversold awaiting rebound' characteristics. The stochastic oscillator (KD) is currently neutral, not yet issuing a clear reversal signal. The Commodity Channel Index (CCI) also indicates neutrality, reflecting that trend momentum has not significantly strengthened for now. However, several other oscillation indicators have issued strong oversold warnings. The Relative Strength Index (RSI) value is 33, already on the edge of the oversold region, traditionally seen as a potential buy signal. The Williams %R indicator also explicitly points out that the stock price is in the oversold range, supporting a buying perspective. More critically, the momentum oscillation indicator has issued a 'bottom divergence' buy signal, which usually means downward momentum is weakening and prices may be nearing a bottom. Additionally, the VR trading ratio indicator suggests 'severe oversold, possible bottoming,' further reinforcing the judgment that market sentiment has become extremely pessimistic.

In terms of key price levels, technical analysis defines clear defensive and offensive ranges. Below, the first key support level is located at HKD 480; if it effectively breaks down, the next important support will test HKD 438. Above, the resistance level needs to primarily break through HKD 524 (near the intersection of the 10-day and 30-day moving averages); if successful, it could challenge the HKD 550 mark. These price levels will serve as critical references for assessing the strength and sustainability of a rebound.

Integrating signals from various technical indicators, the system issues a 'Technical Indicator Summary Signal' of 'Strong Buy,' with a signal strength of 12, an important positive signal that cannot be overlooked. Although trend indicators such as MACD, Bollinger Bands, and Ichimoku Cloud still display sell signals, indicating that mid- to long-term downward pressure has not been fully relieved, multiple leading oscillators simultaneously issuing oversold and divergence signals often suggest that the probability of a short-term technical rebound is significantly increasing. Data shows an upward probability of 53%, slightly favoring the bulls.

In summary, Tencent's technical chart currently shows that after a sustained decline, the stock price has entered a technically oversold state. Although the overall trend remains constrained below the moving averages, the dense appearance of bottom divergences and oversold signals, along with proximity to the primary support at HKD 480, offers short-term traders an attractive opportunity for a potential rebound. Investors should monitor whether the stock price can stabilize above the HKD 480 support level, accompanied by volume cooperation, and aim to challenge the HKD 524 resistance level. However, it must be remembered that if the stock price breaks down below HKD 480 with high volume, it may test stronger support, requiring a reassessment of market risks. In the current environment, the technicals support adopting a short-term strategy of 'cautious buying on dips, focusing on resistance during rebounds.'

Tencent's stock price remained weak last week, falling consecutively below key levels at 520 and 500 yuan. The trading volume of derivatives from March 25-27 showed clear divergence. The trading volume of call warrants initially rose then fell: the first day saw 10,099.19 million contracts, increasing to 10,197.03 million on the 26th, reflecting bottom-fishing capital entering to bet on a rebound; after the price broke down on the 27th, it dropped to 10,137.93 million contracts. Over three days, there was a net increase of 38.74 million contracts, indicating some funds still expect a rebound. The trading volume of put warrants rose continuously before plummeting: starting at 325.81 million contracts on the first day, slightly rising to 326.9 million on the 26th, then sharply dropping to 275.29 million on the 27th—a single-day decline of 15.8%, showing clear signs of profit-taking by short sellers.

In terms of bull and bear certificates, the trading volume of bull certificates first increased then decreased: starting at 1,180.08 million contracts on the first day, increasing to 1,196.29 million on the 26th, but plunging to 1,067.29 million after the stock price fell below 500 yuan on the 27th, resulting in a cumulative decrease of 112.79 million contracts over three days as bullish investors exited significantly. The trading volume of bear certificates continued to rise, increasing from 177.41 million contracts on the first day to 198.78 million on the 27th, a cumulative gain of 12.04%, showing bears adding more positions.

On March 23, Tencent's underlying stock rose by a cumulative 1.42% over the following two days, with corresponding derivatives performing impressively, $MSTENCT@EC2606C.C (15921.HK)$ 、 $BITENCT@EC2606A.C (16225.HK)$ with gains reaching 14% over two days, $JP#TENCTRC2609R.C (62983.HK)$ 、 $UB#TENCTRC2607V.C (58805.HK)$ and some even rising by 20%, fully demonstrating the high leverage characteristics of derivatives during minor fluctuations in the underlying stock.

For call warrants, investors may consider $MSTENCT@EC2606C.C (15921.HK)$ , which has an exercise price of 530.5 yuan. This product stands out because its premium and implied volatility are among the lowest in similar products, meaning that investors betting on a rebound will pay relatively less for time value and volatility costs, allowing them to capture upside momentum purely. With approximately 11.2x leverage, it is suitable as a core tool for capturing rebounds.

If considering hedging downside risk or taking a bearish position, put warrants are a direct choice. Among these, $UBTENCT@EP2608B.P (26702.HK)$ has an exercise price of 428.68 yuan, with both its premium and implied volatility being the lowest in the market, offering about 6.9x leverage, providing clear cost advantages. Another option $JPTENCT@EP2608B.P (27020.HK)$ , also with an exercise price of 428.68 yuan, while not having the lowest premium, offers the lowest implied volatility and relatively higher leverage, giving bearish investors another highly efficient choice.

For investors seeking higher leverage and with clear stop-loss discipline, bull and bear warrants are a more straightforward choice. To play a rebound, you may focus on $UB#TENCTRC2607V.C (58805.HK)$, with the forced recovery price set at HKD 475, offering an actual leverage of up to approximately 21.9 times, and low premium, effectively amplifying gains from rebounds above the key support level. If you're bearish on the market outlook, $JP#TENCTRP2810G.P (61813.HK)$ is worth noting, with the forced recovery price set at HKD 548, providing the highest actual leverage in the list at around 9.9 times, and also the lowest premium, making it an efficient tool for deploying strategies when the stock price falls back after being resisted at the resistance zone.

Technology stocks have recently come under significant pressure, $SMIC (00981.HK)$ falling more than 4%, $KUAISHOU-W (01024.HK)$ drops over 3%, $BABA-W (09988.HK)$ 、 $XIAOMI-W (01810.HK)$ fell more than 2%, $MEITUAN-W (03690.HK)$ dropping over 1%. Do you think Tencent's current price has entered a reasonable mid-to-long-term allocation range? Feel free to share your thoughts in the comments section. For more market analysis, keep following 'HK Stock Warrants Jenny' for daily updates!

Reminder: 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 are not responsible for any loss or damage caused by reliance on the information in this article. Technical analysis only shows whether certain technical conditions are met; a comprehensive assessment of asset performance should be conducted using additional data. Decisions to trade should not be based solely on this article. Please note that past performance is not indicative of future results.

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