This HKD AMTD Digital (NYSE: HKD) Since a few days ago, the share price has been rising sharply.
Shares of the Hong Kong-based fintech company closed at $10.07 on Jan. 4 and are trading at $29.75 at the time of writing. Most of the value climb came during today’s trading session.
To make things interesting, there was no news from the company today to explain why its shares were out of the game. So what happened?
Let’s investigate why investors are very bullish on this company today.
One theory is that Chinese stocks such as the Hong Kong dollar rallied as the country reopened after years of lockdown under a zero-covid policy.
yesterday Alibaba Group (NYSE: BABA ) Shares soared 12.52%.and JD.com (NASDAQ: JD ) An increase of more than 7%.
Some analysts predict that Chinese consumers will start buying and consuming products en masse, similar to how American consumers reacted as American cities lifted their lockdowns. This recovery has also been seen in the travel industry, so it makes sense for investors to predict that pent-up demand in the Chinese market will also unleash.
If all goes according to plan, the Chinese economy will ready to grow This year’s growth rate is 4.7 percent, according to Nikkei Asia. One thing that could hamper work is a spike in COVID-19 cases around the Lunar New Year, which falls in February. But once the festivities are over, the economy looks set to hit full steam ahead in the second quarter of this year and beyond.
Thinking outside the box here, and drawing inspiration from recent history, is the fact that the Hong Kong dollar also shares some of its movement with the Hong Kong dollar. This similarity has been cited as a potential reason for the post-IPO share price surge.
Last August, the company’s stock has risen 21,000% since it went public, closing at $1,679 a share, up from $7.80 in July. A few days later, the stock price plummeted after peaking.
So there could be a similar situation today, with Wall Street traders once again mistaking it for Hong Kong’s official currency.
But what about rallies?
Those factors, then, could lead investors to wonder where the rally is going and whether it’s too late to get in — or if it’s wise to get in in the first place.
The rally was dubious to say the least, and on the face of it, it might have been a short squeeze, but there wasn’t a huge amount of stocks being shorted before then.
Volume jumped from 315 shares to 91,594 shares in one day, making the stock grossly overvalued according to its technical indicators. At the time of writing, the RSI gave an overbought rating of 76.06.
Whether this was a case of deliberate manipulation may not be possible to say.
For investors who like to gamble: some similarities can be drawn between this and GameStop’s (NYSE: GME ) Rally, which is supported through ideology and a lot of thin air. The stock is down 50.49% in the last year, so it can serve as a warning.
The reasons for the Hong Kong dollar’s rebound are unclear and appear suspicious due to the large volumes that have poured into the stock in a short period of time.
It could be mistaking the stock for the Hong Kong dollar, or it could be a short squeeze destroying short sellers, but either way, a rally is dangerous for both sides of the position.
The stock’s technicals and common sense point to a sharp pullback, but a sudden spike in volume and enthusiasm could lead to some nasty surprises.
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