Stay long, with a trailing-stop set below the 27,450-pt support. The HSIF ended lower to form a black candle yesterday. It closed at 28,155 pts, after oscillating between a high of 28,448 pts and low of 28,128 pts. However, it is not surprising that the market is experiencing profit-taking activities after the recent gains. On a technical basis, the bullish sentiment stays intact. This is given that the index does not negate the bullishness of 8 Feb’s “Bullish Engulfing” pattern. Overall, we believe the upside swing that started from the aforementioned pattern is not over yet.

Based on the daily chart, we are eyeing the immediate support level at 27,450 pts, ie the low of 8 Feb’s “Bullish Engulfing” pattern. The next support would likely be at 26,835 pts, determined from the low of 22 Jan. Towards the upside, the immediate resistance level is seen at 28,509 pts, which was the high of 13 Feb. Meanwhile, the next resistance is maintained at 29,113 pts, ie the previous high of 26 Jul 2018.

Hence, we advise traders to stay long, in line with our initial recommendation to have long positions above the 26,000-pt level on 10 Jan. A trailing-stop can be set below the 27,450-pt mark in order to lock in part of the profits.

Source: RHB Securities Research - 20 Feb 2019