Stay long. The HSIF ended lower to form a “Doji” candle yesterday. It settled at 26,985 pts, after hovering between a high of 27,160 pts and low of 26,875 pts throughout the day. However, it is not surprising that the market is experiencing profit-taking activities after the recent gains. On a technical basis, the positive sentiment stays intact. This is given that the index does not erase more than 50% of the gains from 15 Jan’s white candle. Moreover, the 21-day SMA line is now pointing upwards, this indicates that the rebound from 3 Jan’s “Bullish Harami Cross” pattern is not diminished yet.

As seen in the chart, we are eyeing the immediate support level at 26,560 pts, ie near the midpoint of 15 Jan’s white candle. The next support is maintained at 24,876 pts, determined from the low of 3 Jan’s “Bullish Harami Cross” pattern. 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.

Therefore, we advise traders to stay long, since we initially recommended initiating long above the 26,000-pt level on 10 Jan. A trailing-stop can be set below the 26,560-pt mark in order to secure part of the gains.

Source: RHB Securities Research - 24 Jan 2019