Maintain short positions. The HSIF ended higher to form a white candle yesterday. It rose to a high of 28,713 pts during the intraday session, before ending at 28,643 pts for the day. Unsurprisingly, yesterday’s white candle should be viewed as a result of bargain-hunting activities following recent losses. On a technical basis, we think the bears may continue to control the market as long as the HSIF does not negate the bearishness of the “Shooting Star” pattern that formed on 10 Jul. Overall, we remain bearish on the index’s near-term outlook.

According to the daily chart, we maintain the immediate resistance at 29,013 pts, obtained from the high of 10 Jul’s “Shooting Star” pattern. The next resistance is anticipated at the 30,000-pt psychological mark. Towards the downside, the immediate support is seen at 27,720 pts, which was the previous low of 5 Jul. If this level is taken out, look to 27,244 pts – defined from the previous low of 29 Sep 2017 – as the next support.

To recap, on 18 Jun, we initially recommended traders to initiate short positions below the 30,800-pt level. We continue to advise staying short for now, while setting a trailing-stop above the 29,013-pt threshold. This is in order to secure part of the gains.

Source: RHB Securities Research - 25 Jul 2018