Keep in short positions as opportunities lean more towards the sellers. At yesterday’s close, the SGX FTSE China A50 registered a 120-pt loss to 11,257.50 pts. This shows a continuation of the bearish bias we saw in the prior session. Overall, we believe that the retracement since early January is still in play. Despite the appearance of positive momentum in the “Bullish Harami” candlestick pattern on 3 Jul, no strong upside follow-through has been detected. This implies that the bulls are still unable to wrest control from the bears. In addition, note that the 100-day SMA line has also crossed firmly below the 200-day SMA line, which points towards a weak outlook. This enhances our bearish view.

The daily chart above suggests that opportunities are still leaning more towards the sellers. Thus, it is best that traders maintain short positions. In order to secure some of the trading profits, we advise setting a trailing-stop above the 11,570-pt threshold. For the record, we made the short recommendation on 31 May following a downside development below 12,060 pts.

The immediate support is maintained at 10,745 pts, which is located at the low of 3 Jul’s “Bullish Harami” pattern. For the next support, look to 10,150 pts, which was 16 Aug 2016’s high. Conversely, we set the immediate resistance at 11,570 pts, or the high of 29 Jun. This is followed by the next resistance at the 11,985-pt mark, which was obtained from the low of 31 May’s “Bullish Engulfing” pattern.

Source: RHB Securities Research - 18 Jul 2018