Stay long while setting a trailing-stop below the 26,000-pt support. The HSIF ended lower to form a black candle yesterday. It settled at 26,769 pts, after oscillating between a high of 27,041 pts and low of 26,666 pts for the day. However, the appearance of yesterday’s black candle indicates a result of profit-taking activities following the recent gains. From a technical perspective, the bullish sentiment stays intact. This is as long as the index does not close below the 26,000-pt support mentioned previously. Overall, we think the rebound – which begin with 3 Jan’s “Bullish Harami Cross” pattern – may persist.

Based on the daily chart, we are eyeing the immediate support level at the 26,000-pt psychological mark. If a decisive breakdown arises, look to 24,876 pts – which was the low of 3 Jan’s “Bullish Harami Cross” pattern – as the next support. Towards the upside, the immediate resistance level is seen at 27,329 pts, ie the high of 4 Dec 2018. Meanwhile, the next resistance is anticipated at 28,037 pts, situated at the previous high of 26 Sep 2018.

Thus, we advise traders to stay long, following our recommendation of initiating long above the 26,000-pt level on 10 Jan. A trailing-stop can be set below the 26,000-pt mark as well in order to limit the downside risk.

Source: RHB Securities Research - 18 Jan 2019