Stay short, with a trailing-stop set above the 28,798-pt resistance. The HSIF ended higher to form another positive candle yesterday. It closed at 28,063 pts, after hovering between a high of 28,169 pts and low of 27,790 pts. However, the appearance of 10-15 May’s positive candles indicate that the market may be experiencing a technical rebound following recently-seen losses. As the index is still trading below the declining 21-day SMA line and 28,798-pt resistance mentioned previously, this implies that the bearish sentiment stays intact. Overall, we think the downside swing – which started from 15 Apr’s “Shooting Star” pattern – may persist.

Currently, we anticipate the immediate resistance at 28,798 pts – this is set at the high of 9 May’s long black candle. Meanwhile, the next resistance is seen at 29,400 pts, ie near the midpoint of 6 May’s long black candle. To the downside, the near-term support is maintained at 27,450 pts, which was obtained from the previous low of 8 Feb. This is followed by the 27,000-pt psychological mark.

Consequently, we advise traders to stay short, following our recommendation of initiating short below the 29,400- pt level on 7 May. A trailing-stop can be set above the 28,798-pt mark to secure part of the gains.

Source: RHB Securities Research - 16 May 2019