Stay short, as the correction is still in play. Yesterday was a weak session for the SGX FTSE China A50, as it posted a 90-pt loss to 12,475 pts. A black candle was formed after the index oscillated between a low of 12,430 pts and high of 12,562.50 pts. The chart shows no strong upside movement, which left the bullish bias in 31 May’s “Bullish Engulfing” candlestick pattern as unconfirmed. From the technical standpoint, this implies that the current correction is still in play. Overall, there is no change to our bearish view.

In the absence of any strong upside movement, we believe the situation still favours the sellers. As such, traders are advised to stay in short positions. In order to minimise the upside risk, we recommend setting a stop-loss above the 12,837-pt mark. This is in line with our short call on 31 May, following a breach below the 12,060-pt threshold.

We keep the immediate support at 12,320 pts, which is located at the low of 12 Feb’s “Bullish Harami” pattern. The following support is maintained at 11,985 pts, or the low of 31 May’s Bullish Engulfing” pattern. On the flip side, our immediate resistance is at 12,837 pts, which was 15 May’s high. For the next resistance, look to 13,130 pts, or 5 Mar’s low.

Source: RHB Securities Research - 14 Jun 2018