Stay short, with a new trailing-stop set above the 29,860-pt level. The HSIF formed a positive candle last Friday. It settled at 29,335 pts, off its high of 29,427 pts and low of 29,007 pts. However, it is not surprising that sellers may be taking a pause following the recent gains. On a technical basis, we think the downside momentum is still present in the near term, as the index has remained below the declining 21-day SMA line for more than a week. Furthermore, as the 14-day RSI indicator deteriorated to a weaker reading without being oversold, this indicates that the near-term downside move remains valid. Overall, we remain bearish on our near-term outlook.

According to the daily chart, we are now eyeing the immediate resistance level at 29,860 pts, ie situated near the midpoint of 19 Jun’s “Long Black Day” candle. The next resistance is seen at 31,544 pts, which was the high of 7 Jun. On the other hand, the immediate support level is anticipated at the 29,000-pt round figure, set at the low of 12 Feb as well. The next support is maintained at 28,149 pts, ie the previous low of 7 Dec 2017.

To re-cap, on 18 Jun, we initially recommended traders to initiate short positions below the 30,800-pt level. We continue to advise them to stay short for now, while setting a new trailing-stop above the 29,860-pt threshold. This is in order to lock in part of the profits.

Source: RHB Securities Research - 25 Jun 2018