Initiate long positions above the 26,700-pt level. The HSIF formed a long white candle yesterday – an indication of strong buying activity. It surged 646 pts to close at 26,987 pts, off the session’s low of 26,222 pts. The index successfully closed above the previously-indicated 26,892-pt resistance and recouped most of the previous week’s losses, implying that sentiment has turned positive. This can be viewed as a continuation of buyers extending the rebound from the “Hammer” pattern formed on 12 Sep. Yesterday’s closing also triggered our previous trailing-stop recommendation at the 26,892-pt threshold – which has captured part of the profit. Note we initially advised traders to initiate short below the 27,520-pt level on 6 Sep.

Currently, we are eyeing the immediate support at 26,700 pts, situated near the midpoint of 13 Sep’s long white candle. The next support is anticipated at 26,020 pts, ie the low of 12 Sep’s “Hammer” pattern. Towards the upside, the immediate resistance is seen at the 28,000-pt psychological mark. If this level is taken out, look to 28,574 pts – obtained from the previous high of 30 Aug – as the next resistance.

Hence, we advise traders to initiate fresh long positions above the 26,700-pt level. A stop-loss is preferably set below the 26,020-pt threshold in order to limit downside risk.

Source: RHB Securities Research - 14 Sept 2018