Stay short, with a new trailing-stop set above the 26,771-pt level. The HSIF’s downward momentum continued as expected yesterday after it formed a black candle for a third consecutive day. It lost 310 pts to close at 26,149 pts, off its high of 26,771 pts and low of 26,128 pts. Based on the current technical landscape, the nearterm market correction will likely continue, as the index has marked lower closes accordingly since 4 Oct. In addition, as the 21-day SMA line is likely to turn lower, it appears the bearish sentiment has been enhanced. Overall, we keep our bearish view on the HSIF’s near-term outlook.

As seen in the chart, we now anticipate the immediate resistance at 26,771 pts, ie the high of 8 Oct. If the price climbs above this level, look to 28,037 pts – obtained from the previous high of 26 Sep – as the next resistance. To the downside, we eye the near-term support at 26,020 pts, which was the previous low of 12 Sep. This is followed by the 26,000-pt psychological mark.

To re-cap, on 3 Oct we initially recommended traders to initiate short positions below the 27,400-pt level. We continue to advise them to stay short for now, while setting a new trailing-stop above the 26,771-pt threshold. This is in order to lock in part of the profits.

Source: RHB Securities Research - 9 Oct 2018