Stay short, with a trailing-stop set above the 29,013-pt resistance. The HSIF formed a “Doji” candle yesterday. It closed at 28,209 pts after hovering between a high of 28,382 pts and low of 28,019 pts throughout the session. However, the appearance of yesterday’s “Doji” candle merely indicates that the sellers may be taking a pause after the recent plunge. Since the 21-day SMA line is still pointing downwards, this indicates that the near-term bearish sentiment stays intact. Furthermore, the 14-day RSI indicator is now declining further without being oversold, ie the bearish sentiment has been enhanced.

The immediate resistance is maintained at 29,013 pts, which was the high of 10 Jul’s “Shooting Star” pattern. If a decisive breakout occurs, the next resistance is likely to be at the 30,000-pt psychological spot. To the downside, we anticipate the immediate support at 27,720 pts, ie the previous low of 5 Jul. Meanwhile, the next support is seen at 27,244 pts, which is situated at the previous low of 29 Sep 2017.

Therefore, we advise traders to maintain short positions, in line with our initial recommendation to have short positions below the 30,800-pt level on 18 Jun. A trailing-stop can be set above the 29,013-pt threshold in order to lock in part of the profits.

Source: RHB Securities Research - 24 Jul 2018