Stay short. The HSIF ended higher to form a white candle last Friday. It dropped to a low of 27,732 pts during the intraday session, before ending at 28,224 pts for the day. On a technical basis, last Friday’s white candle should merely be viewed as a result of bargain-hunting activities following the recent plunge. In light of the HSIF continuing to stay below the declining 21-day SMA line for more than a month, this indicates the near-term downside move may persist. Overall, we keep our bearish view on the HSIF’s near-term outlook.

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 a breakout arises, the next resistance is seen at the 30,000-pt psychological mark. Towards the downside, the immediate support is anticipated at 27,720 pts, which was the low of 5 Jul. Meanwhile, the next support is maintained at 27,244 pts – this was determined from the previous low of 29 Sep 2017.

Hence, we advise traders to maintain short positions, given that we initially recommended initiating short below the 30,800-pt level on 18 Jun. A trailing-stop set above the 29,013-pt threshold is preferable in order to secure part of the gains.

Source: RHB Securities Research - 23 Jul 2018