Child Internet Market (2010-06-09 Tencent analysis)

Today Hang Seng Index made an almost vertical bounce after lunch break. HSI closed up, but many may have noticed that one of the HSI components actually did not follow the trend but dropped severely --- 0700.HK Tencent.



After the news that Tencent would be going to develop a non-profit-oriented product on Children, which is expected to produce less profits, price of Tencent fell in the fourth consecutive trading day today.

In the daily chart of Tencent above, price has actually reached the last 137.75 resistance. Interestingly, it also hit the 250 Simple Moving Average. This would give a very large support to the price. Today should be a great time to enter long position of Tencent and we can estimate a rebound back to around 148.

If the resistance breaks, then Tencent would enter free-fall stage without large support. Then we may enter short position.