Stay short, as the bearish bias is still in play below the 12,837-pt level. The SGX FTSE China A50 jumped 227.50 pts to 12,500 pts on Monday. It charted a white candle that breached above the previous 12,320-pt resistance, which implied that the session was led by the bulls. This shows an extension of the bullish bias we detected in 31 May’s “Bullish Engulfing” candlestick pattern. Nevertheless, there is no change to our bearish view. This is given that the index is still trading below the 12,837-pt mark, which implies that the bulls are still unable to take control of the market from the bears.

Based on the daily chart, as long as the SGX FTSE China A50 is unable to break above the 12,837-pt threshold, this implies that the current bearish bias is still in play. Based on the current technical landscape, it is best that traders maintain short positions, with a stop-loss pegged above the aforementioned resistance. This follows our short recommendation below the 12,060-pt level on 31 May.

Our immediate support is now at 12,320 pts, which was obtained from the low of 12 Feb’s “Bullish Harami” pattern. The following support is pegged at 11,882 pts – this is located at the low of 15 Sep 2017. Conversely, we set the immediate resistance at 12,837 pts, or the high of 15 May. This is followed by the 13,130-pt resistance, or the low of 5 Mar.

Source: RHB Securities Research - 5 Jun 2018