Stay short while setting a trailing-stop above the downtrend line. The HSIF’s downward momentum continued as expected after it formed a long black candle yesterday. It plunged 879 pts to close at the low of 24,975 pts. From a technical perspective, the market retracement is likely to continue, as the index has taken out the 25,000-pt threshold and marked a lower close below the downtrend line drawn in the chart. Moreover, yesterday’s candle sent the HSIF to its 2-month low, thereby enhancing the bearish sentiment. Overall, we keep our bearish view on the index’s outlook.

Judging from the current outlook, the immediate resistance is now seen at 26,200 pts – this is situated near the downtrend line above. The next resistance is maintained at 28,037 pts, which was the high of 26 Sep 2018. To the downside, we anticipate the immediate support at 24,457 pts, ie the previous low of 29 Oct 2018. If this level is taken out decisively, the next support is seen at the 24,000-pt psychological spot.

Therefore, we advise traders to maintain short positions, in line with our initial recommendation to have short positions below the 25,940-pt level on 28 Dec 2018. A stop-loss can be set above the downtrend line at the 26,200-pt threshold to limit the risk per trade.

Source: RHB Securities Research - 3 Jan 2019