Stay short while setting a new trailing-stop above the 25,680-pt resistance. After market lost 1,296 pts on 10-11 Oct, the E-mini Dow ended higher to form a white candle last Friday. It gained 131 pts to close at 25,316 pts. Still, the appearance of last Friday’s positive candle can be viewed as a result of bargain-hunting activities after the recent plunge. As the index has failed to recoup the previous session’s losses and continued to remain below the 21-day SMA line, this implies that the near-term bearish sentiment stays intact. Overall, we think that the downside swing, which started from 3 Oct’s historical high, may continue.

Currently, we are now eyeing the immediate resistance level at 25,680 pts, which was the high of 11 Oct. If price recovers above this level, look to 26,522 pts – situated at the high of 10 Oct’s “Long Black Day” candle – as the next resistance. Towards the downside, we anticipated the immediate support level at 24,893 pts, ie the previous low of 11 Oct. Meanwhile, the next support is maintained at 24,611 pts, obtained from the previous low of 11 Jul.

Thus, we advise traders to maintain short positions, following our recommendation of initiating short below the 26,000-pt level on 11 Oct. For now, a new trailing-stop can be set above the 25,680-pt threshold in order to minimise the risk per trade.

Source: RHB Securities Research - 15 Oct 2018