Maintain short positions, in line with our bearish view. The sellers slightly led yesterday’s session, as the SGX FTSE China A50 dipped 22.50 pts to 11,310 pts. During this session, the index rose to its intraday high of 11,507.50 pts and tested the 11,400-pt resistance before selling activities took control. As a result, a small black candle with a longer lower shadow was formed. We do not see any solid positive momentum developing, which indicates the current bearish bias is still exerting itself. We also note that the 100-day SMA line is now situated below the 200-day SMA line. This implies a weak outlook and enhances our bearish view.

Based on the daily chart, we believe the retracement is still ongoing. As such, we maintain our short recommendation with a stop-loss pegged above the 12,320-pt mark. This is in order to minimise the upside risk. For the record, we made the short call on 31 May. This was after the SGX FTSE China A50 dipped below 12,060 pts – an indication that the bears have successfully wrested control from the bulls.

To the downside, we set the immediate support at 11,115 pts, or the low of 4 Jul 2017. This is followed by the 10,735-pt support, which was the high of 30 Nov 2016. On the flip side, we keep the immediate resistance at 11,400 pts – this is located at the low of 14 Aug 2017. For the next support, look to 11,985 pts, or the low of 31 May’s “Bullish Engulfing” pattern.

Source: RHB Securities Research - 29 Jun 2018