ZTE turned stronger after breaking through 26.625, but the risk of chasing higher has started to rise.

From the perspective of the communications sector, the market showed a technically weakening pattern the previous day (6th), $ZTE (00763.HK)$

、 $PCCW (00008.HK)$、 $CHINACOMSERVICE (00552.HK)$ with all technical indicator summary signals showing 'sell'.

Notably, the RSI (Relative Strength Index) for ZTE and PCCW (66 and 67 respectively) have both entered the traditional overbought warning zone. This indicates that ZTE's strong breakout occurredin an environment where the overall technical rating of the sector was bearish and peers were generally facing adjustment pressures.The divergence between its 'sell' signal and its strong share price is significant, which usually meansthe correction of technical indicators is lagging behind the sharp rise in price.This also suggests that its short-term upward momentum may be weighed down by the overall sentiment of the sector, and investors should beware that any sector-wide adjustments in an overbought condition could exacerbate its short-term volatility.

ZTE closed at 27.400 yesterday, with its short-term structure showing a clear strengthening. The stock price is now above the upper Bollinger Band at 26.625, the middle Bollinger Band at 24.565, the 10-day moving average at 25.318, and the 30-day moving average at 23.873. This indicates that this is not a regular rebound but rather a breakout pattern. The latest trading volume has also significantly increased, supporting the rise in stock price, reflecting an obvious improvement in buying support. The market's sentiment towards ZTE in the short term has turned positive.

However, at this stage, it is important to distinguish between two things:

First, ZTE has turned stronger;

Second, the strengthening does not mean that one can unconditionally chase higher prices.

The Relative Strength Index (RSI) is approximately 78.533, indicating very strong momentum, but it is approaching the overbought zone, meaning that while short-term buying is active, fluctuations at higher levels are also likely. For those who already hold the stock, this is good news; for those planning to enter, the risk-reward ratio is less attractive than when the stock was around 25 to 26 previously.

Technically, 26.625 is the most crucial threshold currently. After the stock price breaks through the upper Bollinger Band, if it can stabilize above 26.625, the short-term upward trend can be maintained, with the next resistance level seen at 30.860. This also explains why many investors have started discussing the 30-yuan mark, as levels around 30 are close to the next major resistance area and are not completely without technical basis. However, if the stock price falls back below 26.625, the breakout might fail, and a retest of 25.318 and 24.565 should be anticipated.

In investor commentary, bullish sentiment has clearly risen, with the focus on 30 yuan and the reversal bounce. Among them, the viewpoint that 'stabilizing above 26.94 will trigger a V-shaped rebound' holds more reference value because it is not just blindly predicting a rise but includes positional concepts. From the current technical perspective, 26.625 is the more critical breakout point. As long as the price holds steady around this level, the logic of a strengthening rebound remains valid. Regarding comments like 'Today it will hit 30' or 'at least above 30 yuan,' the direction makes sense, but directly looking at 30.860 from 27.400 in the short term still involves facing profit-taking and selling pressure at higher levels.

Bearish comments mainly stem from the disappointment brought by past trends, such as 'a hopeless case,' 'that’s all,' and 'preparing for another drop this afternoon.' These comments reflect that some investors are still haunted by ZTE's previous failed rebounds. However, this time is different from a typical rebound because the stock price has broken through the upper Bollinger Band, with significantly higher trading volume. Relying solely on past weak impressions to judge could easily lead to being too bearish in the early stages of strengthening.

Of course, the caution of the bears is not entirely without merit. Since the Relative Strength Index (RSI) is approaching overbought levels, it is indeed prone to pullbacks after a rapid rise in the short term. The key to determining whether the bearish view holds is not whether there is a retreat within a day but whether the stock can hold above 26.625 after pulling back. If it holds, it will be a strong pullback; if not, the breakout will have failed.

Observant comments best reflect the current state of the market. Phrases like 'stuck in limbo,' 'any chance of hitting 30?' and 'back to square one' indicate that while many investors see the stock strengthening, they still do not fully believe the uptrend can continue. This skeptical stance actually benefits the extension of the trend since the market isn't unanimously chasing highs yet. However, if the stock price quickly rises near 30 and retail sentiment turns overly optimistic, short-term risks may increase.

Overall, ZTE Corporation is currently a strongly breaking-out stock, but it no longer qualifies as a low-risk entry point. The clearest trading framework is: holding above 26.625 keeps the short-term bias bullish, targeting 30.860; falling below 26.625 raises the risk of retesting 25.318 and 24.565; nearing 30.860, those with profits should consider locking them in. Investors without positions should avoid blindly chasing due to market chatter about reaching 30; instead, it would be more reasonable to wait for a pullback that holds above 26.625 or confirm continuation after increased volume.

The core of ZTE's current price action is not whether it has the potential to reach 30, but whether it can hold above the upper band after breaking through. Holding above 26.625 provides room for discussion of the 30 level; failing to hold above 26.625 means all bullish targets need to be lowered first.

Reply to some investors' views:

@好運伴我: Yesterday (the 6th), breaking above 30 would be considered an aggressive target. While the upward direction looks promising, the stock must first stabilize above 26.625 and gradually challenge 30.860.

@LucienDusk: The trend has indeed clearly strengthened, but the RSI is relatively high, so one should not only focus on bullish sentiment.

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Reminder: This article does not constitute any investment advice.

This article is for reference only and does not constitute any investment advice. 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; asset performance should be comprehensively evaluated using other sources of information, and trading decisions should not be made solely based on this article. Please note that past performance is not indicative of future results.

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