Stay long, with a trailing-stop set below the 25,414-pt support. The HSIF ended lower to form a black candle yesterday. It closed at 25,820 pts, off the session’s high of 26,193 pts and low of 25,700 pts. From a technical viewpoint, we think market sentiment remains positive, given that the index has stayed above the 25,414-pt support mentioned previously for nearly a month. As the bullishness of 21 Nov’s “Hammer” pattern has not been negated, this shows that the selling momentum is considered weak. Overall, we keep our positive view on the HSIF’s outlook.

Based on the daily chart, we are eyeing the immediate support level at 25,414 pts, ie the low of 21 Nov’s “Hammer” pattern. The next support would likely be at 24,457 pts, which was the previous low of 29 Oct. To the upside, we maintain the immediate resistance level at 26,758 pts, obtained near the highs of 8 Oct and 5 Nov. Meanwhile, the next resistance is seen at 27,329 pts, determined from the high of 4 Dec.

Thus, we advise traders to maintain long positions, in line with our initial recommendation to have long positions above the 25,900-pt level on 5 Nov. A trailing-stop can be set below the 25,414-pt threshold in order to minimise the downside risk.

Source: RHB Securities Research - 19 Dec 2018