Initiate short positions below the 27,400-pt level. The HSIF formed a “Long Black Day” candle yesterday, indicating strong selling activities. It plunged 883 pts to close at 26,994 pts, off the session’s high of 27,874 pts. On a technical basis, the index breached below the 21-day SMA line and hit a nearly 2-week low, which indicates that market sentiment is turning bearish. In addition, the 14-day RSI indicator slid below the 50 neutral point to flash a bearish reading at 43.96 pts, thereby enhancing the bearish sentiment. Meanwhile, yesterday’s closing also triggered our trailing-stop, which we previously recommended at the 27,294-pt threshold.

Based on the daily chart, we are now eyeing the immediate resistance level at 27,400 pts, situated near the midpoint of 2 Oct’s “Long Black Day” candle. The next resistance is seen at 28,037 pts, which was the high of 26 Sep. Towards the downside, we anticipate the near-term support level at 26,605 pts, ie the low of 18 Sep. This is followed by 26,020 pts – determined from the previous low of 12 Sep.

Hence, we advise traders to initiate fresh short positions below the 27,400-pt level. A stop-loss can be set above the 28,037-pt threshold in order to minimise the risk per trade.

Source: RHB Securities Research - 3 Oct 2018