Stay short while setting a new trailing-stop above the 29,047-pt level. The downward movement of the HSIF continues as expected, as a black candle was formed yesterday. During the intraday session, the index slumped to a low of 27,775 pts before ending at 28,317 pts for the day. Judging from the current technical landscape, we expect the market retracement that started in early June to continue. This is because the HSIF has erased most of the previous session’s gains and marked a lower close below the declining 21-day SMA line, implying that near-term market sentiment is negative. Overall, we maintain our bearish near-term outlook.

Based on the daily chart, we are now eyeing the immediate resistance level at 29,047 pts, which was the high of 27 Jun’s long black candle. If a breakout arises, the next resistance is seen at the 30,000-pt psychological spot. To the downside, we maintain the near-term support level at 28,149 pts, defined from the previous low of 7 Dec 2017. This is followed by the 28,000-pt round figure.

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 29,047-pt threshold. This is in order to lock in a larger part of the profits.

Source: RHB Securities Research - 4 Jul 2018