Stay long while setting a trailing stop below the 25,966-pt support. The E-mini Dow formed a negative candle with a long lower shadow last Friday. It declined to a low of 26,347 pts during the intraday session, before ending at 26,476 pts for the day. We note that the index is holding above the rising 21-day SMA line, which signals that the bullish sentiment is staying intact. The long lower shadow implies that there was initial selling momentum during the day before the market moved up by the end of the trading session – reflecting that buyers should still have control over the market. Overall, we keep our bullish view on our near-term outlook.

Based on the daily chart, the immediate support is seen at 25,966 pts, which was the low of 18 Sep. Meanwhile, the next support is anticipated at 25,607 pts, ie the previous low of 23 Aug. Towards the upside, we maintain the near term resistance at the 26,797-pt record high. This is followed by the 27,000-pt psychological spot.

Therefore, we advise traders to stay long, given that we initially recommended initiating long above the 24,600-pt level on 11 Jul. In the meantime, a trailing-stop can be set below the 25,966-pt threshold in order to secure part of the gains.

Source: RHB Securities Research - 1 Oct 2018