Keep short, as the current correction has not reached its limit. The SGX FTSE China A50 rebounded by 230 pts to 11,427.50 pts yesterday and left a white candle. This showed the session was led by the buyers. Despite the increase, we have not yet seen any strong upside developments that indicate the current correction has reached its end. In fact, the 14-day RSI indicator continues to fluctuate below the 50-pt neutral level at 44.94 pts. From our technical viewpoint, this implies that market sentiment remains weak. As a result, the positive momentum we highlighted in 3 Jul’s “Bullish Harami” candlestick pattern remains unconfirmed.

The current technical landscape suggests more opportunities to the sellers. Thus, it is best that traders maintain their short positions. In order to secure part of the trading profits, we recommend setting a trailing-stop above the 11,570-pt threshold. Recall that we made the short recommendation on 31 May after the SGX FTSE China A50 dropped below 12,060 pts.

We keep the immediate support at 10,745 pts, which was the low of 3 Jul’s “Bullish Harami” pattern. The next support is at the 10,150-pt threshold, or the high of 16 Aug 2016. Conversely, our immediate resistance is maintained at 11,570 pts, which is located at the high of 29 Jun. This is followed by the 11,985-pt resistance, ie the low of 31 May’s “Bullish Engulfing” pattern.

Source: RHB Securities Research - 13 Jul 2018