Long call remains valid – in line with the ongoing bullish bias. We saw a weak performance by the SGX FTSE China A50 yesterday as it dropped 82.50 pts to 11,430 pts. As a result, a black candle was formed after the index oscillated between a low of 11,415 pts and high of 11,522.50 pts. Nevertheless, this does not negate our positive view, as we do not see any strong downside development yet. Technically speaking, this minor decline is viewed as the SGX FTSE China A50 merely taking a normal breather after it breached firmly above the 20-day SMA line on 27 Aug. Overall, the bulls continue to dominate market sentiment.

In line with the ongoing bullish bias, we expect more upside movements in the coming sessions. As such, it is best that traders maintain their long positions. In order to minimise the trading risk, we advise setting a cut-loss below the 10,745-pt threshold. For the record, we made the long recommendation on 23 Jul, following a breach above the 11,570-pt mark.

To the downside, our immediate support is maintained at 11,150 pts, or the low of 20 Jul. The next support is pegged at the 10,745-pt threshold, which was the low of 3 Jul’s “Bullish Harami” pattern. Conversely, we set the immediate resistance at 11,570 pts, ie the high of 29 Jun. This is followed by the next resistance at 12,007 pts, which was the high of 25 Jul.

Source: RHB Securities Research - 30 Aug 2018