Bearish trend remains intact; stay short. The HSIF’s downward movement continues as expected, as another black candle was formed yesterday. During the intraday session, it dropped to a low of 24,601 pts before ending at 24,896 pts for the day. As the HSIF has successfully taken out the 25,046-pt and 25,000-pt supports mentioned previously, this can be viewed as the bears expanding their selling momentum. Given that the index has posted a black candle for the third consecutive day, this indicates that the downside momentum may continue.

Judging from the current outlook, we are eyeing the immediate resistance at 26,256 pts, which was the high of 11 Oct’s long black candle. If a breakout arises, look to 27,175 pts – determined from the high of 4 Oct – as the next resistance. On the other hand, we are now eyeing the immediate support at the 24,000-pt psychological spot. Meanwhile, the next support is seen at 23,706 pts, obtained from the previous low of 19 Apr 2017.

Thus, we advise traders to stay short, since we had originally recommended initiating short below the 27,400-pt level on 3 Oct. At the same time, 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 - 26 Oct 2018