Stay short, with a trailing-stop set above the 26,000-pt resistance. After posting two black candles in a row, the E-mini Dow ended higher to form a white candle last Friday. It gained 157 pts to close at 25,620 pts, off its high of 25,664 pts and low of 25,457 pts. However, it is not surprising that the market is experiencing a technical rebound after its recent losses. On a technical basis, the bearish sentiment stays intact, as the index is still trading below the declining 21-day SMA line. Overall, we believe the downside swing that began with 1 May’s “Bearish Engulfing” pattern is not over yet.

According to the daily chart, we are eyeing the immediate resistance at the 26,000-pt psychological spot – this was also set near the high of 9 May. The next resistance is likely to be at 26,691 pts, ie the high of 1 May’s “Bearish Engulfing” pattern. To the downside, the immediate support is seen at 25,213 pts, which was the previous low of 8 Mar. Meanwhile, the next support is anticipated at the 25,000-pt round figure.

Therefore, we advise traders to stay short, given that we previously recommended initiating short below the 26,000- pt level on 10 May. A trailing-stop set above the 26,000-pt threshold is preferable as well to minimise the risk per trade.

Source: RHB Securities Research - 27 May 2019