Maintain short positions. The HSIF formed a positive candle last Friday, settling at 27,307 pts off its high of 27,438 pts and low of 27,121 pts. Based on the current outlook, the index has been able to stay below the previouslyindicated 28,317-pt resistance for more than a week, which implies that the sellers are still in control of the market. As the 21-day SMA line is pointing downwards, this leads us to believe the downside swing, which started off 4 Mar’s “Shooting Star” pattern, may continue. Overall, we remain bearish on the HSIF’s outlook.

As seen in the chart, the immediate resistance is seen at 28,317 pts, which was the high of 17 May. If this level is taken out, look to 29,400 pts – determined near the midpoint of 6 May’s long black candle – as the next resistance. Towards the downside, we are eyeing the near-term support at the 27,000-pt psychological mark. This is followed by 26,835 pts, ie the previous low of 22 Jan.

Hence, we advise traders to stay short, following our recommendation of initiating short below the 29,400-pt level on 7 May. In the meantime, a trailing-stop set above the 28,317-pt threshold is preferable to secure part of the gains.

Source: RHB Securities Research - 27 May 2019