港股窩輪Jenny

wrote a column ·

Strong performers, stocks awaiting breakout, and weak rebounds: How to allocate offense and defense among five focus stocks

After the broader market’s five consecutive gains, the most common misconception is that all stocks should be handled the same way.

In reality, some stocks show strong trends but are already too extended to chase; others are still trading sideways and require a breakout; and some may experience single-day rebounds yet remain fundamentally weak in their overall trend.

These five focus stocks this time fall neatly into three groups.

1. China Construction Bank $CCB (00939.HK)$ : Strongest trend, but that doesn’t mean it’s most attractive to chase at current prices

On July 31, CCB declined 1.6% but still closed above all moving averages. Put warrants’ open interest increased by 26.68% in a single day, while both bull and bear warrant open interest also rose, reflecting growing divergence among investors at elevated levels.

CCB has gained over 12% in the past 13 days, with an upside probability score of 90—the strongest among the five stocks. However, its current price of HK$9.21 is very close to the first resistance level at HK$9.32.

Two more reasonable strategies are:

– Wait for a pullback to stabilize around HK$9.13 before considering bullish instruments;

– Only follow the upward trend after a confirmed breakout above HK$9.32.

Bullish instruments for comparison:

– Macquarie CBBC 14907 (Call): Strike price HK$9.39, effective leverage 6.8x;

– HSBC Bull Certificate 67576: Knock-in price HK$8.10, about 12% below current price, leverage 7.6x.

Major bull warrant concentration zone is at HK$7.00–7.09, while bear warrant concentration zone is at HK$9.60–9.69.

Therefore, the range of HK$9.55–9.69 represents not only technical resistance but also a dense zone of bearish positions. CCB can still be viewed positively, but as it approaches this zone, it becomes increasingly unsuitable to suddenly increase leverage.

2. China Life Insurance $CHINA LIFE (02628.HK)$ : Price trend is relatively smooth, but product volatility warrants caution

China Life has posted three consecutive gains and closed above all moving averages, showing a more complete technical pattern than many other financial stocks. Open interest in call warrants declined by 7.42%, and bull certificate open interest fell by 6.53%, indicating no significant market rush into bullish products.

Technically, HK$28.90 is the first support level, and HK$29.34 is the short-term resistance. A breakout above HK$29.34 would target the next level at HK$30.20.

Product-wise:

– Morgan Stanley CBBC 14673 Call: Strike price HK$30.99, leverage of 5.4x, but implied volatility is around 41.8%, which is relatively high;

– HSBC Bull Certificate 67545: Knock-out price HK$26.50, about 9.3% away from the current price, with 8.3x leverage.

If you're only looking at a breakout over the next one to two days, bull certificates offer more direct directional sensitivity; if you wish to avoid the knock-out mechanism, call warrants are more suitable, though you’ll need to accept higher implied volatility and time decay.

3. CATL $CATL (03750.HK)$ : The current price sits right at the directional pivot point

CATL closed at HK$622.5, marking its third consecutive gain and reclaiming the 20-day moving average. However, the current price is right near the support at HK$622 and resistance at HK$626. Open interest in put warrants has increased for four straight days, and that of bear certificates has risen for two consecutive days, indicating market skepticism about whether the rebound can continue.

This kind of price level is the least suitable for 'buy first and wait for direction.'

First, watch whether the price can break above RMB 626:

– UBS Group 15872 Call Warrant: Strike price at RMB 629.38, leverage of 7.7x;

– UBS Group 64601 Bull Certificate: Knock-in price at RMB 590, about 5.2% below current price, leverage of 12.2x.

The bull certificate offers higher leverage but a significantly narrower knock-in buffer. CATL’s major bull warrant holdings cluster between RMB 570 and RMB 574.5, while bear warrant holdings concentrate between RMB 685 and RMB 689.5.

If the stock price breaks below RMB 614.5, the bullish assumption will need reassessment; conversely, as long as it hasn’t fallen below RMB 622, one shouldn’t turn bearish solely due to rising put warrant open interest.

4. CNOOC $CNOOC (00883.HK)$ : The adjustment hasn't broken the structure, but upside room hasn't opened up yet

CNOOC fell 1.49%, holding above its 10-day moving average for now; call warrant open interest has declined for four consecutive days, while put warrant open interest has risen for four straight days, reflecting investors increasing defensive positions amid the oil stock's pullback.

Short-term support is seen at RMB 23.72, with resistance in the RMB 23.90–24.28 range.

Representative products:

– Macquarie CBBC 22091 Call: Strike price HK$24.90, 7x leverage;

– UBS Group Bull Certificate 64590: Knock-out price HK$22, approximately 7.6% from current price, 12.5x leverage;

– UBS Group Put Warrant 13504: Strike price HK$22.28, 4.8x leverage.

CNOOC is currently neither clearly strong nor weak, but awaiting a breakout from its trading range. Buying puts solely due to a single-day drop may result in time value erosion near support levels.

5. SMIC $SMIC (00981.HK)$ : Even if it rebounds, it first needs to confirm a breakout above the moving averages

SMIC rose by 2.02%, yet remains capped below all moving averages. Call warrant open interest increased by 6.5%, while bull certificate open interest declined by 14.82%, indicating some capital is using warrants to bet on a rebound, but bull certificate positions have not risen in tandem.

For SMIC, what truly matters right now isn't the single-day gain, but whether it can break above HK$67.50. Until that happens, any rebound should still be viewed as a weak recovery.

Product-wise:

– CIS 19093 Call Warrant: Strike price at HK$62.93, leverage of 5.1x, but implied volatility is as high as 70.85%, resulting in relatively high holding costs;

– HSBC 63115 Bull Certificate: Knock-out price at HK$59, about 6.7% away from current price, with 12.7x leverage;

– Citi 28711 Put Warrant: Strike price at HK$63.88, leverage of 3.1x.

Although the call warrant is closer to the at-the-money level, its high implied volatility means the product may not fully track the underlying stock’s upside. If you're merely speculating on a short-term rebound, you must treat HK$67.50 as the confirmation level, rather than chasing leverage alone.

How should these five stocks be categorized?

– Relatively strong but waiting for a pullback: CCB, China Life;

– Awaiting breakout or breakdown: CATL, CNOOC;

– Rebound still needs confirmation: SMIC.

Key points to remember

A strong stock trend doesn't necessarily mean high reward-to-risk ratio at current levels; a weak stock trend doesn't mean puts are suitable at any price. Most importantly, first identify support, resistance, and invalidation conditions before selecting a product.

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