Tencent Moving Averages Herald More Gains: Technical Analysis

Tencent Holdings Ltd. may extend a rally that has lifted China’s biggest Internet stock more than 8 percent this year after the shares broke above moving averages and a measure of trading momentum surged, according to AMTD Financial Planning Ltd.

Tencent has traded above its 50-day moving average since Jan. 16. The last time the shares broke above the average on July 3 it heralded a 20 percent gain through Nov. 2. The stock is also trading above its 100- and 200-day moving averages, with its nine-day relative strength index, a measure of trading momentum, climbing to 80.2 on Jan. 18 from 53.99 at the start of last week. Tencent gained 1.1 percent to HK$270.40 on Jan 18.

“The share price broke above all the major moving averages, maybe there’s some breakthrough,” said Kenny Tang, Hong Kong-based general manager of AMTD. The rising relative strength index “indicates momentum has been improving in the share price. It should test HK$280 in the short-term.”

Tencent also broke above its Ichimoku cloud on Jan. 16, another bullish signal used by some technical analysts. The last time the stock broke above the cloud -- a pattern formed from midpoints between historical highs and lows -- was on Aug. 15, after which it jumped 21 percent in the next 11 weeks.

Technical analysts study charts of trading patterns and prices to predict changes in a security, commodity, currency or index.

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