Enter long positions as the bulls are back in control of sentiment. At last Friday’s closing, the SGX FTSE China A50 ended at 11,582.50 pts, and posted a 325-pt increase. It charted a white candle that breached above the previous 11,570-pt trailing stop. Technically speaking, this has confirmed the momentum in 3 Jul’s “Bullish Harami” candlestick pattern. In addition, we also saw an encouraging growth in momentum, as the 14-day RSI indicator has finally broke above the 50-pt neutral level, at 51.19 pts. Having said so, we believe that the bulls are now in control of market sentiment.

As such, it is best that traders initiate fresh long positions. In order to minimise the downside risk, we advise setting a stop-loss below the 10,745-pt mark. Note that by exiting the current short positions and entering a new long one at this level, traders should secure part of the trading profits.

Our immediate support is now set at 11,570 pts, obtained from the high of 29 Jun. Should the SGX FTSE China A50 slip below this level, the following support is at 10,745 pts, ie the low of 3 Jul’s “Bullish Harami” pattern. Conversely, we set the immediate resistance at 11,985 pts, the low of 31 May’s “Bullish Engulfing” pattern. This is followed by the 12,640-pt resistance mark, or the high of 7 Jul.

Source: RHB Securities Research - 23 Jul 2018