Stay short while setting a trailing-stop above the 29,013-pt resistance. The HSIF formed a black candle with a long upper shadow yesterday. It surged to the high of 28,828 pts during the intraday session before ending at 28,295 pts for the day. From a technical perspective, investor sentiment remains bearish in the near term, since the index has posted a third consecutive black candle and breached below the 21-day SMA line. Meanwhile, yesterday’s long upper shadow shows that there was buying momentum during the day before the market pushed it down by the end of the trading session. This reflects that sellers still have control over the market.

As seen in the chart, we are eyeing the immediate resistance at 29,013 pts, ie the high of 10 Jul’s “Shooting Star” pattern. The next resistance will likely be at the 30,000-pt psychological spot. Towards the downside, the immediate support is maintained 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.

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

Source: RHB Securities Research - 2 Aug 2018