Stay long, in line with the ongoing bullish bias. The SGX FTSE China A50 ended yesterday’s session at 11,732.50 pts and posted a 112.50-pt loss. This weak performance left a black candle after the index hovered between a low of 11,685 pts and high of 11,937.50 pts. However, there is no change to our positive view, as we have not seen any strong downside development yet. The fact that the SGX FTSE China A50 continues to trade above the 20-day SMA line points towards a bullish outlook. Moreover, market strength remains encouraging, given that the 14-day RSI indicator continues to hover above the 50-pt neutral level at 53.51 pts. These positive indicators support our upside view.

Based on the daily chart, we believe the 3-week rebound is still in play. Hence, we think it best that traders maintain long positions with a stop-loss set below the 10,745-pt threshold, so that the trading risk is kept at a minimum. For the record, we initially made the long recommendation on 23 Jul after the index breached above the 11,570-pt level.

We set the immediate support at 11,570 pts, which is located at the high of 29 Jun. If this level is taken out, the following support is found at the 10,745-pt critical mark, ie the low of 3 Jul’s “Bullish Harami” pattern. Conversely, our immediate resistance is set at 11,985 pts, or the low of 31 May’s “Bullish Engulfing” pattern. The next resistance is set at 12,640 pts, which was derived from 7 Jul’s high.

Source: RHB Securities Research - 27 Jul 2018