Stay long, as opportunities lean more towards the buyers. The SGX FTSE China A50 ended yesterday’s session at 11,512.50 pts to post a 20-pt loss. A “Doji” candlestick pattern was formed, which implied that neither bulls nor bears were able to take firm control at the end of the day. We now see the index continuing to trade firmly above 10,745 pts, which indicates that the near 2-month upside movement remains in play. Our upside view is also supported by the 14-day RSI indicator hovering above 50 pts – an indication that market strength is present.

Based on the daily chart above, we believe the opportunities are leaning more towards the buyers. As a result, traders are advised to stay long with a cut-loss pegged below the 10,745-pt threshold. This is in order to minimise the downside risk. For the record, we initially made the long call on 23 Jul after the SGX FTSE China A50 successfully breached above the 11,570-pt level.

We keep the immediate support at 11,150 pts, which was the low of 20 Jul. This is followed by the next support at the 10,745-pt threshold, ie the low of 3 Jul’s “Bullish Harami” pattern. On the flip side, our immediate resistance is pegged at the 11,570-pt mark, which is located at the high of 29 Jun. Our next resistance is set at 12,007 pts – this was derived from the high of 25 Jul.

Source: RHB Securities Research - 29 Aug 2018