Stay long, with stop-loss set below the 24,474-pt support. After posting three white candles in a row, the HSIF ended lower to form a black candle yesterday. It declined to a low of 25,700 pts during the intraday session, before ending at 25,794 pts for the day. However, from a technical viewpoint, yesterday’s black candle can be viewed as a weak pullback after recent gains. We think the bulls may continue to control the market, given that the index did not negate the bullishness of the “Bullish Engulfing” pattern that formed on 30-31 Oct. Overall, we stay bullish on the HSIF’s outlook.

Based on the daily chart, the immediate support is seen at 25,006 pts, obtained from the low of 13 Nov. The next support is anticipated at 24,474 pts, which was the previous low of 31 Oct’s “Bullish Engulfing” pattern. On the other hand, the immediate resistance is situated at 26,758 pts, which was the high of 5 Nov. The next resistance is maintained at 28,037 pts, ie the previous high of 26 Sep.

Therefore, we advise traders to stay long, in line with our initial recommendation to have long positions above the 25,900-pt level on 5 Nov. Meanwhile, a stop-loss can be set below the 24,474-pt threshold in order to minimise the downside risk.

Source: RHB Securities Research - 21 Nov 2018