Near-term outlook remains positive; stay long. Following the positive candles that were formed during 12-18 Jul, the E-mini Dow ended lower to form a black candle last night. It declined 102 pts to close at 25,059 pts, after oscillating between a high of 25,209 pts and low of 25,034 pts. Unsurprisingly, yesterday’s black candle should be viewed as profit-taking activities following recent gains. We believe the bulls may continue to control the market as long as the E-mini Dow does not erase more than 50% of gains that were created by 9 Jul’s long white candle. Overall, we keep our bullish view on the E-mini Dow’s near-term outlook.

Presently, we are eyeing the immediate support at 24,600 pts, ie near the midpoint of 9 Jul’s long white candle. The crucial support is seen at 23,978 pts, determined from the low of 28 Jun’s “Bullish Harami” pattern. Towards the upside, the immediate resistance is anticipated at 25,400 pts, obtained from the previous high of 11 Jun. If this level is taken out, look to 25,813 pts – which was the high of 27 Feb – as the next resistance.

Therefore, we advise traders to maintain long positions, given that we initially recommended initiating long above the 24,600-pt level on 11 Jul. In the meantime, a trailing-stop can be set below the 24,600-pt threshold as well in order to limit the downside risk.

Source: RHB Securities Research - 20 Jul 2018