Stay short while setting a new trailing-stop above the 28,755-pt level. The HSIF ended higher yesterday to form a positive candle. It settled at 28,197 pts, off the session’s low of 27,720 pts. Unsurprisingly, yesterday’s positive candle should merely be viewed as a result of bargain-hunting activities following the recent plunge. We think the bears may continue to control the market as long as the HSIF does not recoup the losses created by 3-4 Jul’s black candles. Overall, we keep our bearish view on the HSIF’s near-term outlook.

Currently, we are eyeing the immediate resistance at 28,755 pts – this was determined from the high of 3 Jul. The next resistance is maintained at the 30,000-pt psychological spot. On the other side, the immediate support is seen at 27,720 pts, ie the low of 5 Jul. If price breaks down, the next support is anticipated at 27,244 pts, which was the previous low of 29 Sep 2017.

Recall that we initially recommended traders to initiate short positions below the 30,800-pt level on 18 Jun. We continue to advise traders to stay short for now while setting a new trailing-stop above the 28,755-pt threshold. This is in order to lock in a larger part of the gains.

Source: RHB Securities Research - 6 Jul 2018