Maintain short positions. The HSIF formed a “Doji” candle last Friday. It closed at 28,220 pts after having hovered between a high of 28,493 pts and low of 27,820 pts throughout the session. The near-term market sentiment remains bearish, as the index has stayed below the previously-indicated 28,755-pt resistance for nearly a week. Technically speaking, as the HSIF failed to recoup the losses from 3-4 Jul’s black candles, this shows the near-term downside swing remains intact. Overall, we remain bearish on the index’s near-term outlook.

As seen in the chart, the immediate resistance is seen at 28,755 pts, ie the high of 3 Jul. If this level is taken out, the next resistance is maintained at the 30,000-pt psychological mark. Towards the downside, we maintain the near-term support at 27,720 pts, which was obtained from the low of 5 Jul. This is followed by 27,244 pts, ie the previous low of 29 Sep 2017.

Thus, we advise traders to stay short, in line with our initial recommendation to have short positions below the 30,800-pt level on 18 Jun. In the meantime, a trailing-stop set above the 28,755-pt threshold is preferable in order to secure part of the profits.

Source: RHB Securities Research - 9 Jul 2018