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Why Hong Kong stocks could be in big trouble

Massive pro-democracy protests in Hong Kong have captured the world's attention—and created a new geopolitical concern for the markets. The city's Hang Seng index dropped nearly 2 percent on Monday to a two-month low. And according to some Wall Street experts, it could get much worse for Hong Kong stocks in the weeks ahead.

The civil protests are "affecting the Hang Seng already, and it will probably continue to do so for a while," said Gina Sanchez of Chantico Global.

(Read: Why Hong Kong unrest scares markets)

Protesters in the former British colony, now a major center of global finance, are taking issue with Chinese interference in Hong Kong elections. At this point, the biggest concern for Beijing is assumed to be a broader push for democracy in mainland China. Within Hong Kong, the Chinese government has been warned by the United States to exercise restraint in dealing with protesters.

"You know when you see political unrest like this, immediately the first sectors that tend to get hit are tourism and retail, and that's exactly what's happening," Sanchez continued. "Now, that's probably going to leak out into the rest of the economy."

When it comes to the chart, Richard Ross of Auerbach Grayson says the Hang Seng is at a critical level.

(Watch: Stocks close down on HK protests; data eyed)

"With this negative geopolitical headline, it's putting the icing on the cake of a 9 percent decline" from early September highs, Ross said. "It's stopped right on the dime on prior resistance, which is now support. Also the 200-day moving average."

The tension on the chart is mounting—and unless the technical tension is resolved in a favorable manner, the results could be catastrophic for investors.

"When we push out to a new multiyear high and we get that sharp reversal in the other direction, investors think you're left holding the bag, and they start to move out en masse," the technician said. "So now you're piling on here with the negative fundamental headlines that could really start to set us up for a bigger move to the downside."

"If you don't hold this multiyear trend-line, the Hang Seng could be in trouble," Ross concluded.

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