Stay short, with a trailing-stop set above the 30,900-pt resistance. After posting two black candles in a row, the HSIF ended higher to form a white candle yesterday. During the intraday session, it rose to a high of 30,513 pts, before ending at 30,497 pts for the day. Unsurprisingly, yesterday’s white candle should merely be viewed as a technical rebound following recent losses. We think the bears may continue to control the market as long as the HSIF does not recoup more than 50% losses from 23 May’s long black candle. Overall, we keep our bearish view on the HSIF’s near-term outlook.

Based on the daily chart, we are eyeing the immediate resistance at 30,900 pts, ie near the midpoint of 23 May’s long black candle. The crucial resistance is maintained at 31,499 pts, which was the high of 15 May’s “Bearish Engulfing” pattern. To the downside, the immediate support is seen at 29,575 pts, obtained from 7 May’s low. Meanwhile, the next support is anticipated at the 29,000-pt psychological spot.

Hence, we advise traders to stay short, following our recommendation to initiate short below the 30,900-pt level on 24 May. At the same time, a trailing-stop can be set above the 30,900-pt threshold as well, in order to limit the risk per trade.

Source: RHB Securities Research - 1 Jun 2018