Initiate short positions below the 27,520-pt level. The HSIF formed a long black candle yesterday – an indication of strong selling momentum. It plunged 777 pts to close at 27,105 pts, off the session’s high of 27,877 pts. The index successfully closed below the 27,500-pt support mentioned previously and hit its lowest close in more than two weeks, implying that sentiment has turned bearish. This can be viewed as a continuation of sellers extending the downside swing from the “Shooting Star” pattern that formed on 30 Aug. Yesterday’s close has also triggered our trailing stop, which we had previously recommended at the 27,500-pt threshold.

Based on the daily chart, the immediate resistance is now seen at 27,520 pts, situated near the midpoint of 5 Sep’s long black candle. The next resistance is anticipated at 28,574 pts, defined from the high of 30 Aug’s “Shooting Star” pattern. To the downside, we are eyeing the near-term support at 26,642 pts, which was the previous low of 16 Aug. This is followed by the 26,000-pt psychological mark.

Hence, we advise traders to initiate short positions below the 27,520-pt level. A stop-loss is advisable above the 28,574-pt threshold in order to limit the risk per trade.

Source: RHB Securities Research - 6 Sept 2018