Negative indicators support our bearish view, stay short. The SGX FTSE China A50 inched up 42.50 pts to 11,470 pts last Friday. However, this increase does not negate our bearish view, as the current market sentiment remains weak. We highlight that the 14-day RSI indicator is fluctuating below the 50-pt neutral level at 46.05 pts, which implies weak market sentiment. Additionally, the fact the 100-day SMA line crossed firmly below the 200- day SMA line points towards a weak outlook. All these negative indicators support our bearish view.

Based on the daily chart, we think the opportunities are still leaning more towards the sellers. As such, traders are advised to stay in short positions with a trailing-stop pegged above the 11,570-pt threshold. This is in order to secure part of the trading profits. Our short recommendation was initially triggered below the 12,060-pt mark on 31 May.

To the downside, our immediate support stays at 10,745 pts, or the low of 3 Jul’s “Bullish Harami” pattern. The next support is pegged at the 10,150-pt threshold, which was the high of 16 Aug 2016. Meanwhile, we keep the immediate resistance at 11,570 pts, ie the high of 29 Jun. The following resistance is set at 11,985 pts, which is located at the low of 31 May’s “Bullish Engulfing” pattern.

Source: RHB Securities Research - 16 Jul 2018