Bearish sentiment remains unchanged; stay short. The HSIF formed a negative candle yesterday. It settled at 24,723 pts, after hovering between a high of 25,041 pts and low of 24,572 pts throughout the day. We note that the index is still trading below the declining 21-day SMA line and the 26,256-pt resistance as mentioned previously, which suggests that the bearish sentiment remains unchanged. Overall, we expect the market to drop further if the immediate 24,457-pt support is taken out decisively in the coming sessions.

According to the daily chart, we are eyeing the immediate resistance at 26,256 pts, determined from the high of 11 Oct’s long black candle. If the price breaks above this level, look to 27,175 pts – which was the high of 4 Oct – as the next resistance. Towards the downside, the immediate support is now seen at 24,457 pts, ie the low of 29 Oct. Meanwhile, the next support is anticipated at the 24,000-pt psychological mark.

Hence, we advise traders to maintain short positions, in line with our initial recommendation to have short positions below the 27,400-pt level on 3 Oct. At the same time, a trailing-stop can be set above the 26,256-pt threshold in order to secure part of the gains.

Source: RHB Securities Research - 31 Oct 2018