Both the Hang Seng and Hang Seng Tech moved up substantially today even though the number of new Covid cases surged to historic highs in Hong Kong.

On February 9th, 1161 daily new cases were reported, while the seven-day average up to February 8th was only 192 cases.

Like mainland China, Hong Kong’s authorities remained firm in their pursuit of Covid Zero. As such, with cases doubling every three days, the local government is under pressure to ramp up restrictions that might see the introduction of a lockdown if the virus continues to spread at these elevated levels.

Gains in Hong Kong were powered primarily by the tech sector, including Alibaba, which jumped 6.12% after a tumble earlier in the week. The Hang Seng Tech index soared over 3%, led by Netease advanced 3.92% and Tencent up 2.21% at the time of writing.

Technical Analysis

From a technical viewpoint, the rally since early February has brought the index above the 20, 50, and 100-day simple moving averages (SMA), which bodes well for the bulls.

The next target to keep a close eye on will be the January high at around 25054, which, if broken through, would recover all the losses from late November and seal the view of Hang Seng’s bottoming out.

A closer look at the hourly chart also supports the expectation that the level around 25000 is only inches away if Hang Seng follows the current moving trajectory.

On the other hand, a pullback from the target level could bring 24003 back in view. An RSI reading close to the overbought zone suggests a short-term breather could be on the cards soon.