Market correction not over yet, stay short. The E-mini Dow formed another positive candle last night. It rose 104 pts to close at 25,674 pts, off its high of 25,714 pts and low of 25,326 pts. Despite this higher close, the index failed to recover above the 26,000-pt threshold. This signals that the negative sentiment stays intact. On a technical basis, as the E-mini Dow continues to stay below the falling 21-day SMA line, this suggests the downside swing from 1 May’s “Bearish Engulfing” pattern remains valid. Overall, we keep our bearish view on the index’s outlook.

Based on the daily chart, the immediate resistance is seen at the 26,000-pt round figure, or near the high of 9 May as well. If this level is taken out, look to 26,691 pts – the previous high of 1 May’s “Bearish Engulfing” pattern – as the next resistance. Towards the downside, we are eyeing the immediate support at 25,213 pts, ie the previous low of 8 Mar. The next support is anticipated at the 25,000-pt psychological mark.

Therefore, we advise traders to stay short, since we previously recommended initiating short below the 26,000-pt level on 10 May. In the meantime, a stop-loss can be set above the 26,691-pt threshold to limit the risk per trade.

Source: RHB Securities Research - 16 May 2019