Bearish sentiment remains unchanged; stay short. The E-mini Dow’s downside momentum continued as expected after it ended lower to form a black candle last night. It declined 308 pts to close at 25,463 pts, after oscillating between a high of 25,779 pts and low of 25,320 pts. As the index has successfully posted a black candle for the second consecutive day, this can be viewed as the bears extending their selling momentum. Furthermore, the 14-day RSI indicator deteriorated to a weaker reading at 39.08 pts, thereby enhancing the bearish sentiment. Overall, we remain bearish on the E-mini Dow’s outlook.

Judging from the current outlook, the immediate resistance level is maintained at the 26,000-pt round figure, also situated near the high of 9 May. If this level is taken out, look to 26,691 pts – which was the high of 1 May’s “Bearish Engulfing” pattern – as the next resistance. Towards the downside, we are eyeing the immediate support level at 25,213 pts, ie the previous low of 8 Mar. The next support is seen at the 25,000-pt psychological mark.

Thus, we advise traders to maintain short positions, in line with our initial recommendation to have short positions below the 26,000-pt level on 10 May. At the same time, a new trailing-stop can be set above the 26,000-pt mark as well in order to limit the risk per trade.

Source: RHB Securities Research - 24 May 2019