Skip to content

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Please ensure you fully understand the risks involved. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Please ensure you fully understand the risks involved.

Hang Seng Index technical outlook: a pause, not a reversal

Upward pressure in the Hang Seng Index has faded somewhat in the short term; however, the broader trajectory for HK/China stocks remains up and what are the key levels to watch?

Source: Bloomberg

Hang Seng Index technical outlook - bullish

The recent retreat in Hong Kong shares appears to be a pause and not a reversal of the uptrend. Indeed, breadth market indications and technical charts continue to paint a bullish story over the coming weeks.

Price facts, sentiment, narrative

Price Facts

  • The Hang Seng Index (HSI) rose to an 11-month high at the end of last month. Although the upward momentum has slowed most recently, there is no sign of a reversal. The break last month above the 200-day moving average confirms that the short-term trend is bullish.


  • In only three weeks of 2023, foreign buying of Chinese stocks exceeded last year's total.


  • China's ending of its zero-Covid policy and signs of easier monetary policy (new loans likely surged in January) is leading to a re-rating of economic growth prospects. Less regulatory pressure on China's internet and gaming sectors, and easing of Sino-US tensions is supportive.

    Notwithstanding the recent rebound, HK stocks were trading at the cheapest level in more than 10 years. Risk: from a longer-term perspective, structurally subdued Chinese economic growth on deteriorating demographics poses a headwind.

As of Thursday, 96% of the members in the Hang Seng Index (HSI) were above their respective 100-day moving averages (DMAs), not too far from 100% a week ago. Data from 2001 onwards suggests that when 100% of the members are above their respective 100-DMAs, the index has been up 60% of the time over the subsequent 120 days (see distribution plot of returns).

Distribution plot of returns over 120 days

Source: Bloomberg; chart created by Manish Jaradi using Python.

On technical charts, HSI has pulled back from stiff resistance on a horizontal line from early 2022 (at about), coinciding with the 89-week moving average. The drop below the lower edge of a rising channel from October confirms that the upward pressure has faded somewhat in the short term (somewhat because of the steepness of the channel.

That is, even sideways price action can lead to a break below the channel, but it may not be necessarily bearish).

Source: TradingView

However, the broader trend continues to be bullish, (see previous update for more details) as reflected by the Moving Average Convergence Divergence indicator in the positive territory and the color-coded candles.

Having said that, consolidation doesn’t necessarily mean that the index can’t fall further – it could, but generally not deep enough to alter the broader trajectory.

Hang Seng Index daily chart

Source: TradingView

In this regard, there is quite a strong converged cushion at the early-December high of 19926, coinciding with the 89-day moving average (DMA) and the 200-DMA. Stronger support is on the lower edge of the Ichimoku cloud cover (now at about 18000).

This information has been prepared by IG, a trading name of IG Australia Pty Ltd. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

Start trading forex today

Trade the largest and most volatile financial market in the world.

  • Spreads start at just 0.6 points on EUR/USD
  • Analyse market movements with our essential selection of charts
  • Speculate from a range of platforms, including on mobile

Live prices on most popular markets

  • Forex
  • Shares
  • Indices

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.