Stay long. After posting three white candles in a row, the E-mini Dow ended lower to form a black candle yesterday. It declined 64 pts to close at 25,536 pts, off its high of 25,632 pts and low of 25,501 pts. However, yesterday’s black candle illustrates that the market may be taking a breather following recent gains. Given that the index has continued to stay above the rising 21-day SMA line, this implies that the near-term bullish sentiment is still intact. Overall, we believe that the rebound – which took place from 2 Aug’s “Hammer” pattern – may continue.

As seen in the chart, the immediate support is seen at 25,087 pts, ie the low of 2 Aug’s “Hammer” pattern. The next support is seen at 24,611 pts, determined from the low of 11 Jul. Towards the upside, we are eyeing the immediate resistance at 25,813 pts, which was the previous high of 27 Feb. Meanwhile, the next resistance is maintained at the 26,000-pt psychological spot.

Hence, we advise traders to maintain long positions, following our recommendation to initiate long above the 24,600-pt level on 11 Jul. In the meantime, a trailing-stop can be set below the 25,087-pt threshold in order to lock in part of the profits.

Source: RHB Securities Research - 9 Aug 2018