Stay short, with a new trailing-stop set above the 28,798-pt level. The downward movement of the HSIF has continued as expected, as a “Long Black Day” candlestick formed yesterday. The index plunged 769 pts to close at 28,024 pts. From a technical perspective, market sentiment remains bearish, as the aforementioned black candle was the second one in two consecutive sessions. In addition, the 14-day RSI indicator is now declining lower without being oversold, indicating the bearish sentiment has been enhanced. Overall, we keep our bearish view on the HSIF’s outlook.

Based on the daily chart, we are now eyeing the immediate resistance at 28,798 pts, which was the high of 9 May’s “Long Black Day” candle. The next resistance is maintained at 29,400 pts – this is situated near the midpoint of 6 May’s long black candle. Conversely, the immediate support is seen at 27,781 pts, or the low of 15 Feb. If this level is taken out, the next support is anticipated at 27,450 pts, which was the low of 8 Feb.

To re-cap, on 7 May we initially recommended traders to initiate short positions below the 29,400-pt level. We continue to advise them to stay short for now, while setting a new trailing-stop above the 28,798-pt threshold to lock in part of the profits.

Source: RHB Securities Research - 10 May 2019