Stay long, in line with our positive expectations. The SGX FTSE China A50 jumped 260 pts yesterday to 11,927.50 pts. It left a white candle without any upper shadow, which implied that the buyers were in control towards the end of the session. As a result, the index rose to near the 11,985-pt resistance. Based on the immediate positive action, chances are high that the bullish bias – since the appearance of 3 Jul’s “Bullish Harami” candlestick pattern – may still extend further. This is also supported by the 14-day RSI indicator now located above the 50-pt neutral level at 57.17 pts – an indication that market strength is present.

In line with the ongoing bullish bias, it is best that traders maintain their long positions. In order to minimise the downside risk, we advise setting a stop-loss below the 10,745-pt threshold. For the record, we initially made a short recommendation on 23 Jul after the SGX FTSE China A50 successfully broke above the 11,570-pt mark.

To the downside, our immediate support stays at 11,570 pts, or the high of 29 Jun. This is followed by the next support at 10,745 pts, which is located at the low of 3 Jul’s “Bullish Harami” pattern. We set the immediate resistance at 11,985 pts, ie the low of 31 May’s “Bullish Engulfing” pattern. The next resistance is pegged at the 12,640-pt mark, or 7 Jul’s high.

Source: RHB Securities Research - 25 Jul 2018