Question

Question 1 Technical Analysis (200-250 words)

Last trading period: (any date from 2 to 13 March 2020)

Technical analysis is an approach of studying the price behaviour and attempting to forecast price movements in the financial markets, by using historical price data , trading activities and statistics.

Select Tencent (0700.hk) with tradable options in the Hong Kong Stock Exchange and demonstrate your understanding and application of by using any ONE of following:

a)Relative Strength Index (RSI)

b)Moving Average Convergence / Divergence (MACD)

c)On Balance Volume (OBV)

d)Bollinger Bands

Apply Technical Analysis to identify and explain the buy and sell signal, support and resistance levels etc

Answer 1

Here is the hourly chart of the required stock from 4th March to 13th March

Here each candlestick represents price range (low, high, open, close) for each trading hour. The red line chart below is the 14 period RSI ( Relative Strength Index ). The RSI indicates the velocity and magnitude of directional price movements. Generally, a buy signal is given if the RSI goes above 30 from lower levels & a sell signal is considered if the RSI comes down below 70 from higher levels. 2 such signals have been marked as an example in the chart shown above for reference.

Also, the short term resistance line is shown on the RSI. As the RSI failed to go above this level we can say that this level of RSI is acting as a resistance for the given short term & evidently as we see later in the chart, the RSI (& prices ) did fall further below those levels.