Initiate short positions below the 28,550-pt level. The HSIF formed a white candle yesterday. It rose 249 pts to close at 28,485 pts. However, on a technical basis, as the index has recently breached below the 21-day SMA line and hit its lowest point in nearly three weeks, this indicates that market sentiment is turning negative. The 8 Mar breakdown can be viewed as a confirmation of the bears expanding the downside swing from 4 Mar’s “Shooting Star” pattern. Meanwhile, 8 Mar’s long black candle has also triggered our previous trailing-stop recommendation at the 28,563-pt threshold – which has locked in part of the profits. Note we initially advised traders to initiate long above the 26,000-pt level on 10 Jan.

Currently, we anticipate the immediate resistance level at 28,550 pts, ie set near the midpoint of 8 Mar’s long black candle. The next resistance is seen at 29,255 pts, which was the high of 4 Mar’s “Shooting Star” pattern. To the downside, we are eyeing the near-term support level at 27,781 pts and 27,450 pts, determined from the lows of 15 Feb and 8 Feb respectively.

Hence, we advise traders to initiate fresh short positions below the 28,550-pt level. A stop-loss can be set above the 29,255-pt threshold in order to limit the risk per trade.

Source: RHB Securities Research - 12 Mar 2019