Maintain short positions, in line with our downside view. Although we detected an upside momentum in 29 Jun’s “Bullish Engulfing” candlestick pattern, no positive follow-through was sighted. Instead, the SGX FTSE China A50 dropped and breached firmly below the previous 11,400-pt support. This negated the bullish bias we highlighted in the aforementioned reversal pattern. We also note that the 100-day SMA line is currently situated below the 200-day SMA line, which implies a bearish outlook. Overall, the bears are strong – this is in line with our downside view.

The current technical landscape shows that the bears are in firm control of market sentiment. Technically speaking, it best that traders maintain short positions. In order to secure part of the trading profits, we advise them to set up a new trailing-stop above 11,985 pts. This follows our initial short recommendation below the 12,060-pt threshold on 31 May.

We revise the immediate support to 10,735 pts, which was derived from the high of 30 Nov 2016. The following support is pegged at 10,150 pts, or the high of 16 Aug 2016. Towards the upside, the immediate resistance is now at 11,400 pts, which was obtained from 14 Aug 2017’s low. This is followed by the 11,985-pt resistance, ie the low of 31 May’s “Bullish Engulfing” pattern.

Source: RHB Securities Research - 3 Jul 2018