Stay short while setting a trailing-stop above the 26,256-pt resistance. The downward movement in the HSIF has continued as expected, as another black candle was formed yesterday. It closed at 25,212 pts, after oscillating between a high of 25,654 pts and low of 25,050 pts. Market sentiment remains bearish, as the index has posted a second consecutive black candle below the falling 21-day SMA line. Moreover, the 14-day RSI indicator is now dropping further without being oversold, suggesting the bearish sentiment has been enhanced. Overall, the bearish outlook should remain intact.

As seen in the chart, the immediate resistance level is seen at 26,256 pts, determined from the high of 11 Oct’s long black candle. The next resistance is anticipated at 27,175 pts, which was the high of 4 Oct. Towards the downside, the near-term support level is maintained at 25,046 pts, ie the previous low of 19 Oct. This is followed by the 25,000-pt psychological mark.

Therefore, we advise traders to stay short, given that we initially recommended initiating short below the 27,400- pt level on 3 Oct. A trailing-stop can be set above the 26,256-pt threshold in order to secure part of the gains.

Source: RHB Securities Research - 25 Oct 2018