Best to stay long, as the bullish bias is still exerting itself. At the end of yesterday’s session, the SGX FTSE China A50 posted a 220-pt loss to 11,170 pts. As a result, a black candle was formed, which implied the session was led by the sellers. Nevertheless, this weak performance does not negate our positive view. As long as the index is able to stay above 10,745 pts, we believe the bullish bias observed since the appearance of 3 Jul’s “Bullish Harami” candlestick pattern remains in play.

In the absence of any strong downside development, we are of the view that the 5-week bullish bias has not been fully negated yet. As such, it is best that traders maintain their long positions. For risk-minimisation purposes, we advise them to set up a stop-loss below the abovementioned 10,745 pts. This follows our long recommendation above the 11,570-pt level on 23 Jul.

The immediate support is maintained at 11,150 pts, or the low of 20 Jul. This is followed by the next support at 10,745 pts, which was the low of 3 Jul’s “Bullish Harami” pattern. Conversely, our immediate resistance is set at 11,570 pts, or the high of 29 Jun. If this level is taken out, the next resistance is pegged at the 12,000-pt mark, which is located at 25 Jul’s high.

Source: RHB Securities Research - 9 Aug 2018