Stay short. The HSIF formed a “Doji” candle yesterday. It settled at 28,087 pts, after oscillating between a high of 28,160 pts and low of 27,791 pts. Still, the downward momentum is not diminished thus far, as the index continues to stay below the 21-day SMA line. On a technical basis, as long as the HSIF does not recoup the losses created by 9 May’s long black candle, there is a possibility that the downside swing would keep going. In view that the 21-day SMA line is now likely to turn lower, the bearish sentiment has therefore been enhanced.

As seen in the chart, the immediate resistance level is seen at 28,798 pts, ie the high of 9 May’s long black candle. The next resistance would likely be at 29,400 pts, situated near the midpoint of 6 May’s long black candle. Towards the downside, the near-term support level is seen at 27,450 pts, defined from the previous low of 8 Feb. This is followed by the 27,000-pt psychological spot.

Thus, we advise traders to maintain short positions, given that we previously recommended initiating short below the 29,400-pt level on 7 May. A trailing-stop can be set above the 28,798-pt threshold in order to lock in part of the profits.

Source: RHB Securities Research - 17 May 2019