Stay short while setting a trailing-stop above the 29,013-pt resistance. The HSIF formed a black candle yesterday. It dropped to a low of 28,121 pts during the intraday session, before ending at 28,194 pts for the day. From a technical perspective, the near-term bearish sentiment stays unchanged as the index has remained below the declining 21-day SMA line and hit its 1-week low. In view of yesterday’s lower close, the HSIF may further extend the downside swing that started from 10 Jul’s “Shooting Star” pattern. Overall, we remain bearish on the HSIF’s near-term outlook.

Currently, the immediate resistance is seen at 29,013 pts, obtained from the high of 10 Jul’s “Shooting Star” pattern. The next resistance is maintained at the 30,000-pt psychological spot. On the other hand, we are eyeing the immediate support at 27,720 pts, determined from the low of 5 Jul. If this level is taken out, the next support is anticipated at 27,244 pts, ie the previous low of 29 Sep 2017.

Therefore, we advise traders to maintain short positions, in line with our initial recommendation to have short positions below the 30,800-pt level on 18 Jun. Meanwhile, a trailing-stop can be set above the 29,013-pt mark in order to lock in part of the profits.

Source: RHB Securities Research - 18 Jul 2018