Stay long. The E-mini Dow ended lower to form a black candle last night. It declined 134 pts to close at 25,294 pts – this was after oscillating between a high of 25,566 pts and low of 25,220 pts. Given that the index has managed to stay above the recent low of the 24,893-pt support for more than a week, this suggests the rebound has not diminished yet. On a technical basis, as the E-mini Dow failed to negate the bullishness of the “Bullish Harami” pattern that formed on 11-12 Oct, the rebound that started from the aforementioned pattern may still carry on. Overall, we keep our positive view on near-term outlook.

According to the daily chart, the near-term support is seen at the 25,000-pt psychological spot. This is followed by 24,893 pts, which was the low of 12 Oct’s “Bullish Harami” pattern. Towards the upside, we anticipate the immediate resistance at 25,845 pts, which was defined from the high of 17 Oct. Meanwhile, the next resistance is likely to be at 26,522 pts – this is situated at the high of 10 Oct’s long black candle.

Consequently, we advise traders to stay long, in line with our initial recommendation of having long positions above the 25,500-pt level on 17 Oct. A stop-loss set below the 24,893-pt threshold – in order to limit the downside risk – is advisable.

Source: RHB Securities Research - 23 Oct 2018