"HK50 Soars 8.41% in Major Breakout: Key Levels to Watch Amid Bullish Momentum"

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China’s recent stimulus measures have gone beyond mere discussion, with several actions already implemented. The key measures include:

Monetary Easing: The People’s Bank of China (PBOC) has reduced the reserve requirement ratio (RRR) by 0.5%, injecting around 1 trillion yuan ($141.82 billion) of liquidity into the financial system. Additional interest rate cuts were also announced, such as a 20 basis points reduction in the central interest rate and a 50 basis points cut on existing mortgage rates, all aimed at spurring lending and stimulating the economy(Gov.cn)(CGTN).
Real Estate and Property Market Support: Lower mortgage rates and reduced down payments (15% for second homes) were implemented to address weaknesses in the property sector. These moves are designed to boost housing demand, clear excess inventory, and stabilize the real estate market, which has been under pressure due to debt-laden developers like China Evergrande(CGTN).
Stock Market Boost: The PBOC has also introduced tools to support the stock market, including collateralized funding options for securities and insurance companies to maintain liquidity. This liquidity provision helps stabilize share prices, encouraging buybacks and providing support for Chinese equities(Gov.cn)(M&G).

Impact on Chinese Stocks:

Since the stimulus measures were announced, Chinese stock indices have reacted positively. For instance, the Shanghai Composite Index and Shenzhen Component Index both surged more than 4%, reflecting renewed investor confidence. Major tech stocks like Alibaba ($BABA), JD.com ($JD), and Tencent ($TCEHY) have experienced gains of around 5-8%, while real estate stocks surged by 6-7%, driven by optimism surrounding the property market support(

CGTN)(

M&G).

The daily chart of the Hong Kong 50 Index (HK50) you’ve provided shows a sharp rally after a long consolidation phase. Here are the key observations and possible scenarios:

Key Technical Features:

Strong Rally: The HK50 has experienced a significant upward move, with the latest candle showing a strong surge of +8.41% (1,737.1 points). This indicates bullish momentum and possibly the start of a breakout.
Resistance Levels: The price is currently close to a key resistance zone at 22,588.0. If this level is broken, it could open the way for further upside.
Support Levels: The next support levels appear at 21,512.7 and around the 20,089.8 mark. These could act as key areas for pullbacks if the index starts to retrace from current levels.
Moving Averages: The price has moved significantly above the moving averages, which suggests strong bullish momentum. The slope of the moving averages also indicates that the market is in a positive trend. However, the sharp distance from the moving averages may hint at a short-term overbought condition.
Previous Structure: The rally has broken through multiple resistance levels, suggesting a change in market sentiment. The previous areas around 19,403.2 and 20,089.8, which acted as resistance, may now serve as support.

Possible Outcomes:

Bullish Continuation: If the index manages to break and sustain above the 22,588.0 resistance, the rally could extend further. In this case, the next resistance zones would need to be determined from historical data or fib retracement levels above this point.
Pullback and Consolidation: Given the sharp rise, there is also a possibility of a pullback to test previous support levels, particularly around 21,512.7 or even down to 20,089.8. If the index finds support at these levels, it could form a base for another leg up.
Short-Term Overbought Conditions: The rapid increase in price may lead to some profit-taking or consolidation. If that happens, watch for how the index reacts around key support levels.

Conclusion:

The HK50 is in a strong bullish trend at the moment, but traders should be cautious of potential pullbacks after such a large move. The key levels to watch are the resistance at 22,588.0 and the support at 21,512.7 and 20,089.8. The next few sessions will likely reveal if the trend continues or if there will be a corrective move.

These measures are not just talk—implementation has already begun, fueling stock market rallies and providing crucial support to banks, real estate, and tech sectors. Investors are optimistic that continued policy easing will sustain these market gains into 2025. However, it remains to be seen whether these efforts can fully stabilize the economy in the face of longer-term structural challenges.