Stay short with a trailing-stop set above the 29,013-pt resistance. The downward movement of the HSIF continued as expected, as another black candle was formed yesterday. It closed at 28,039 pts, off the session’s high of 28,315 pts and low of 27,954 pts. From a technical perspective, we expect the downside swing that started from 10 Jul’s “Shooting Star” pattern to continue. This is because the HSIF has marked a lower close vis- à-vis the previous sessions since 16 Jul, implying that near-term market sentiment is negative. Overall, we maintain our negative near-term outlook.

As seen in the chart, the immediate resistance is maintained at 29,013 pts, which was the high of 10 Jul’s “Shooting Star” pattern. The next resistance would likely be at the 30,000-pt psychological spot. On the other hand, we anticipate the immediate support at 27,720 pts, ie the low of 5 Jul. If this level is taken out, look to 27,244 pts – obtained from the previous low of 29 Sep 2017 – as the next support.

Recall that on 18 Jun, we initially recommended traders to initiate short positions below the 30,800-pt level on 18 Jun. We continue to advise staying short for now, while setting a trailing-stop above the 29,013-pt threshold in order to lock in part of the profits.

Source: RHB Securities Research - 20 Jul 2018