Stay short while setting a trailing-stop above the 28,317-pt resistance. The HSIF ended lower to form a black candle yesterday. It declined to a low of 27,068 pts during the intraday session before ending at 27,226 pts for the day. Based on the current outlook, we think the sellers may have retained control of the market. This was as yesterday’s black candle erased the previous session’s gains. Given that the index has marked a lower close below the declining 21-day SMA line, this implies that the downside swing, which started from 4 Mar’s “Shooting Star” pattern, may carry on. Overall, we remain downbeat on the HSIF’s outlook.

Based on the daily chart, we are eyeing the immediate resistance at 28,317 pts, ie the high of 17 May. The next resistance should likely be at 29,400 pts, which is situated near the midpoint of 6 May’s long black candle. On the other hand, the near-term support is maintained at the 27,000-pt psychological spot. This is followed by 26,835 pts, which was the previous low of 22 Jan.

Consequently, we advise traders to stay short, in line with our initial recommendation to have short positions below the 29,400-pt level on 7 May. A trailing-stop can be set above the 28,317-pt mark to lock in part of the profits.

Source: RHB Securities Research - 28 May 2019