Maintain long positions. The E-mini Dow ended lower to form a black candle last night. It dropped 63 pts to close at 26,481 pts, after oscillating between a high of 26,562 pts and low of 26,337 pts. However, from a technical viewpoint, yesterday’s black candle can merely be viewed as a weak pullback after recent gains. We think the bulls may continue to control the market, given that the index did not negate the bullishness of 8 Oct’s “Hammer” pattern. Overall, we keep our bullish view on the E-mini Dow’s near-term outlook.

Judging from the current outlook, the immediate support is maintained at 26,226 pts, ie the low of 8 Oct’s “Hammer” pattern. If this level is taken out, look to 25,764 pts – which was the previous low of 11 Sep – as the next support. To the upside, we anticipate the near-term resistance at the 26,966-pt historical high. This is followed by the 27,000-pt psychological mark.

Therefore, we advise traders to stay long, since we had originally recommended initiating long positions above the 24,600-pt level on 11 Jul. At the same time, a trailing-stop is preferably set below the 26,226-pt threshold in order to lock in part of the profits.

Source: RHB Securities Research - 10 Oct 2018