Initiate short positions below the 27,728-pt level. The HSIF formed a fourth consecutive black candle yesterday, indicating persistent downward momentum. It closed at 27,230 pts, off the session’s high of 27,728 pts and low of 27,150 pts. The index successfully breached below the 27,444-pt support mentioned previously and hit its lowest point in nearly a year, implying that sentiment has turned bearish. This can be viewed as a continuation of sellers extending the downside move from the “Bearish Engulfing” pattern that formed on 9-10 Aug. Yesterday’s closing has also triggered our stop-loss, which we had previously recommended at the 27,444-pt threshold.

For now, we anticipate the immediate resistance at 27,728 pts, which was the high of 15 Aug. The next resistance would likely be at 28,659 pts, determined from the high of 10 Aug’s “Bearish Engulfing” pattern. Towards the downside, the immediate support is seen at 26,805 pts, ie the previous low of 14 Aug 2017. If price breaks down, the next support is situated at the 26,000-pt psychological spot.

Thus, we advise traders to initiate short positions below the 27,728-pt level. A stop-loss can be set above the 28,659-pt threshold in order to limit the risk per trade.

Source: RHB Securities Research - 16 Aug 2018