Stay short while setting a trailing-stop above the downtrend line. The HSIF formed a positive candle last Friday. It settled at 25,504 pts, after hovering between a high of 25,584 pts and low of 25,216 pts throughout the session. Still, the bearish sentiment stays unchanged, as this candle can only be viewed as sellers probably taking a pause after the recent decline. Since the index is trading below the 21-day SMA line and the downtrend line drawn in the chart, this indicates that the bears are still in control of the market. Overall, we maintain our negative view on the HSIF’s outlook.

As seen in the chart, the immediate resistance level is seen at 25,940 pts, which was the high of 27 Dec. The next resistance would likely be at 26,600 pts, situated near the downtrend line above. Towards the downside, we are eyeing the immediate support level at the 25,000-pt round figure, also set near the low of 13 Nov. The next support is anticipated at 24,457 pts, ie the previous low of 29 Oct.

Thus, we advise traders to maintain short positions, given that we previously recommended initiating short below the 25,940-pt level on 28 Dec. A stop-loss is advisable to set above the downtrend line at the 26,600-pt threshold in order to limit the risk per trade.

Source: RHB Securities Research - 31 Dec 2018