Stay short, with a new trailing-stop set above the 28,317-pt resistance. Yesterday, the HSIF’s selling pressure continued as expected after it formed a long black candle. It lost 381 pts to close at 27,227 pts, off the session’s high of 27,673 pts. Based on the current technical landscape, the market correction is likely to continue in the coming sessions, as the index has erased the previous day’s gains and hit its 4-month low. In addition, the 21-day SMA line is likely to turn lower, enhancing the bearish sentiment. Overall, we keep our bearish view on the HSIF’s outlook.

Based on the daily chart, we are now eyeing the immediate resistance level at 28,317 pts, ie the high of 17 May. The next resistance is seen at 29,400 pts, set near the midpoint of 6 May’s long black candle. To the downside, the near-term support level is anticipated at the 27,000-pt psychological spot. This is followed by 26,835 pts, obtained from the previous low of 22 Jan.

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 28,317-pt threshold. This is in order to lock in a larger part of the profits.

Source: RHB Securities Research - 24 May 2019