Initiate long positions above the 25,900-pt level. The HSIF formed a long white candle last Friday – an indication of strong buying momentum. It surged 1,151 pts to close at 26,493 pts. As the index has risen above the 21-day SMA line and posted a third consecutive white candle, this implies that market sentiment is turning positive. Last Friday’s candle can be viewed as a continuation of the bulls extending the rebound from 31 Oct’s “Bullish Engulfing” pattern. Meanwhile, last Friday’s closing also triggered our previous trailing-stop recommendation at the 25,654-pt threshold – which has captured part of the profit. Note we initially advised traders to initiate short below the 27,400-pt level on 3 Oct.

Presently, the immediate support level is seen at 25,900 pts, situated near the midpoint of 2 Nov’s long white candle. The next support is anticipated at 24,474 pts, which was the low of 31 Oct’s “Bullish Engulfing” pattern. To the upside, we are eyeing the near-term resistance level at 27,252 pts and 28,037 pts, determined from the highs of 3 Oct and 26 Sep respectively.

Hence, we advise traders to initiate fresh long positions above the 25,900-pt level. A stop-loss can be set below the 24,474-pt threshold in order to limit the downside risk.

Source: RHB Securities Research - 5 Nov 2018