Initiate short positions below the 25,940-pt level. The HSIF ended lower to form a black candle yesterday. It settled at 25,394 pts, off its high of 25,940 pts. The index has successfully closed below the previously-indicated 25,414-pt support and hit its lowest point in nearly two months, implying that the sentiment has turned negative. Meanwhile, as the HSIF marked a lower close below the downtrend line – which comprises multiple highs of 26 Jul, 30 Aug and 26 Sep – it indicates that the negative sentiment has been enhanced. Yesterday’s closing has also triggered our trailing-stop, which we had previously recommended at the 25,414-pt threshold.

Based on the daily chart, we are eyeing the immediate resistance level at 25,940 pts, ie the high of 27 Dec. The next resistance is seen at 26,600 pts, set near the aforementioned downtrend line. To the downside, the support level is anticipated at the 25,000-pt round figure, also set near the low of 13 Nov. This is followed by 24,457 pts, determined from the previous low of 29 Oct.

Hence, we advise traders to initiate short positions below the 25,940-pt level. In the meantime, a stop-loss can be set above the 26,600-pt threshold in order to minimise the risk per trade.

Source: RHB Securities Research - 28 Dec 2018