Bearish sentiment remains intact; stay short. The HSIF formed a “Doji” candle last Friday. It settled at 25,458 pts, after hovering between a high of 25,723 pts and low of 25,046 pts throughout the session. Based on the current outlook, the index has been able to stay below the previously-indicated 26,256-pt resistance for more than a week, which implies that the sellers are still in control of the market. With the 21-day SMA line still pointing downwards, this has led us to believe that the downside swing that started from 2 Oct’s long black candle may persist. Overall, we keep our bearish view on the HSIF’s outlook.

As seen in the chart, we are eyeing the immediate resistance level at 26,256 pts, ie the high of 11 Oct’s long black candle. The next resistance would likely be at 27,175 pts, which was the high of 4 Oct. To the downside, we maintain the near-term support level at 25,080 pts, determined from the previous low of 12 Oct. This is followed by the 25,000-pt psychological spot.

Thus, we advise traders to stay short, following our recommendation of initiating short below the 27,400-pt level on 3 Oct. A trailing-stop is preferably set above the 26,256-pt threshold in order to lock in part of the profits.

Source: RHB Securities Research - 22 Oct 2018