Stay short while setting a trailing-stop above the 26,256-pt resistance. The HSIF ended higher to form a white candle yesterday. It closed at 24,911 pts, after oscillating between a high of 24,961 pts and low of 24,474 pts. Still, the appearance of yesterday’s white candle indicates that the market may be experiencing a technical rebound after the losses over the past one month. As the index did not recoup losses from 11 Oct’s long black candle, this implies that the near-term bearish sentiment stays intact. Overall, we think that the downside swing – which started from 2 Oct’s black candle – may persist.

As seen in the chart, the immediate resistance is seen at 26,256 pts, ie the high of 11 Oct’s long black candle. Meanwhile, the next resistance would likely be at 27,175 pts, obtained from the high of 4 Oct. To the downside, we are eyeing the immediate support at 24,457 pts, which was the low of 29 Oct. The next support is seen at the 24,000-pt psychological spot.

Therefore, we advise traders to stay short, following our recommendation to initiate short below the 27,400-pt level on 3 Oct. In the meantime, a trailing top is preferably set above the 26,256-pt threshold in order to lock in part of the profits.

Source: RHB Securities Research - 1 Nov 2018