Stay long while setting a trailing-stop below the 24,600-pt support. The E-mini Dow formed a black candle with a long lower shadow last Friday. It closed at 25,030 pts, off the session’s high of 25,110 pts and low of 24,912 pts. We note the index is still holding above the 21-day SMA line, which signals that the near-term positive sentiment is staying intact. Technically, the long lower shadow implies there was an initial selling momentum during the day before the market moved up by the end of the trading session – reflecting that the buyers should still have control over the market.

Judging from the current outlook, the immediate support is seen at 24,600 pts, which was near the midpoint of 9 Jul’s long white candle. The next support is anticipated at 23,978 pts, ie the low of 28 Jun’s “Bullish Harami” pattern. To the upside, we eye the immediate resistance at 25,400 pts, which was determined from the previous high of 11 Jun. The next resistance is maintained at 25,813 pts – this was obtained from the high of 27 Feb.

Consequently, we advise traders to stay long, in line with our initial recommendation to have long positions above the 24,600-pt level on 11 Jul. A trailing-stop can be set below the 24,600-pt threshold as well in order to minimise the downside risk.

Source: RHB Securities Research - 23 Jul 2018