Downside move likely to continue in the near term; stay short. The HSIF formed a positive candle with a long upper shadow yesterday. It rose to a high of 29,969 pts during the intraday session, before ending at 29,665 pts for the day. We note that the index is still trading below the 21-day SMA line, which signals that near-term bearish sentiment remains intact. The long upper shadow implies that there was initial buying momentum during the day before the market pushed it down by the end of the session – reflecting that sellers still have control over the market. Overall, we keep our bearish view on the near-term outlook.

As seen in the chart, we are eyeing the immediate resistance at 30,295 pts, set at the high of 19 June’s “Long Black Day” candle. Meanwhile, the next resistance would likely be at 31,544 pts, ie the high of 7 June. Towards the downside, we maintain the immediate support at the 29,000-pt psychological spot, also set at the low of 12 Feb. The next support is seen at 28,149 pts, which was the previous low of 7 Dec 2017.

Therefore, we advise traders to maintain short positions, since we had originally recommended initiating short below the 30,800-pt level on 18 June. A new trailing-stop is advisable at above the 30,295-pt threshold in order to limit the risk per trade.

Source: RHB Securities Research - 21 Jun 2018