Opportunities are still leaning towards the buyers, stay long. After four consecutive increases – where the SGX FTSE China A50 breached firmly above the 11,570-pt mark during 19-24 Jul – the index finally slipped 82.50 pts to 11,845 pts yesterday. As a result, a black candle was formed after it oscillated between a low of 11,812.50 pts and high of 12,007.50 pts. Nevertheless, we make no change to our positive view, as the SGX FTSE China A50 is merely taking a breather. As long as no strong retracement is in sight, we believe the bulls remain in control of market sentiment. This is supported by the 14-day RSI indicator, which is hovering above the 50-pt neutral level at 56.74 pts – an indication that market strength is present.

The current technical landscape suggests the opportunities are still leaning more towards the buyers. As such, traders are advised to stay in long positions, with a stop-loss pegged below the 10,745-pt mark. This is to minimise the trading risk. Recall that our long call was triggered on 23 Jul, following a breach above the 11,570-pt threshold.

Our immediate support is maintained at 11,570 pts, which was the high of 29 Jun. The next support is pegged at the 10,745-pt mark, or the low of 3 Jul’s “Bullish Harami” pattern. Meanwhile, the immediate resistance is pegged at 11,985 pts, which is located at the low of 31 May’s “Bullish Engulfing” pattern. For the next resistance, look to 12,640 pts, ie the high of 7 Jul.

Source: RHB Securities Research - 26 Jul 2018