Market near 15-month low; maintain short positions. Selling momentum in the HSIF continued as expected. A fourth consecutive black candle was formed yesterday, which pointed towards a continuation of the downside move. It dropped to a low of 25,971 pts during the intraday session, before ending at 26,060 pts for the day. On a technical basis, investor sentiment remains bearish in the near term, as the HSIF marked a lower close below the 21-day SMA line and hit near its 15-month low. Moreover, as the 14-day RSI indicator is now declining lower without being oversold, the bearish sentiment has been enhanced.

Based on the daily chart, the immediate resistance is seen at 26,771 pts, which was the high of 8 Oct. The next resistance would likely be at 28,037 pts, defined from the previous high of 26 Sep. Towards the downside, the immediate support is now anticipated at 25,971 pts, ie the previous low of 9 Oct. Meanwhile, the next support is situated at the 25,000-pt psychological spot.

Hence, we advise traders to maintain short positions, in line with our initial recommendation to have short positions below the 27,400-pt level on 3 Oct. A trailing-stop can be set above the 26,771-pt threshold in order to secure part of the gains.

Source: RHB Securities Research - 10 Oct 2018