Stay short while setting a trailing-stop above the 29,013-pt resistance. The HSIF ended lower to form a black candle yesterday. It dropped to a low of 28,585 pts during the intraday session, before ending at 28,644 pts. From a technical perspective, the index has marked a lower close vis-à-vis the previous sessions since 26 Jul, implying that the near-term downside movement is likely to continue. Moreover, this movement may further extend the downside swing that started with 10 Jul’s “Shooting Star” pattern. Overall, we keep our bearish view on HSIF’s near-term outlook.

Based on the daily chart, we anticipate the immediate resistance at 29,013 pts, ie the high of 10 Jul’s “Shooting Star” pattern. The next resistance would likely be at the 30,000-pt psychological spot. To the downside, we are eyeing the immediate support at 27,720 pts, which was the previous low of 5 Jul. Meanwhile, the next support is seen at 27,244 pts, obtained from the previous low of 29 Sep 2017.

As such, we advise traders to stay short, following our recommendation to initiate short below the 30,800-pt level on 18 Jun. A trailing-stop can be set above the 29,013-pt threshold in order to secure part of the gains.

Source: RHB Securities Research - 31 Jul 2018