Maintain short positions. Downward momentum in the HSIF continued as expected, as a black candle with a long upper shadow was formed yesterday. During the intraday session, it rose to a high of 28,410 pts before ending at 28,080 pts for the day. The downside move is likely to continue, given that the index has posted a third consecutive black candle. Technically speaking, the long upper shadow shows that there was buying momentum during the day before the market pushed it down by the end of the trading session. This implies a still-bearish outlook over the near term.

Based on the daily chart, we are eyeing the immediate resistance at 29,013 pts, ie the high of 10 Jul’s “Shooting Star” pattern. If this level is taken out, the next resistance is maintained at the 30,000-pt psychological mark. Towards the downside, the immediate support is seen at 27,720 pts, obtained from the low of 5 Jul. Meanwhile, the next support is anticipated at 27,244 pts, which was the previous low of 29 Sep 2017.

As such, we advise traders to stay short, following our recommendation to initiate short below the 30,800-pt level on 18 Jun. A trailing-stop is advisable above the 29,013-pt threshold in order to secure part of the gains.

Source: RHB Securities Research - 19 Jul 2018