Initiate short positions below the 25,000-pt level. The E-mini Dow formed a long black candle last night. It tumbled 628 pts to close at 24,616 pts, off the session’s high of 25,338 pts. From a technical viewpoint, the index breached below the 24,893-pt support mentioned previously and hit its lowest close in more than three months, which indicates that market sentiment is turning bearish. The 21-day SMA line is now turning downwards, suggesting additional selling pressure may be present in the coming sessions. Meanwhile, yesterday’s closing also triggered our stop-loss, which we previously recommended at the 24,893-pt threshold.

Based on the daily chart, the immediate resistance level is seen at the 25,000-pt psychological spot, also situated near the midpoint of 24 Oct’s long black candle. The next resistance would likely be at 25,845 pts, obtained from the high of 17 Oct. To the downside, we anticipate the immediate support level at 23,978 pts, ie the previous low of 28 Jun. Meanwhile, the next support is maintained at 23,467 pts, which was the previous low of 3 May.

Therefore, we advise traders to initiate short positions below the 25,000-pt level. A stop-loss can be set above the 25,845-pt threshold in order to limit the risk per trade.

Source: RHB Securities Research - 25 Oct 2018