Stay short, with a new trailing-stop set above the 27,673-pt level. The HSIF formed a positive candle yesterday. It closed at 27,323 pts, after hovering between a high of 27,449 pts and low of 27,178 pts. However, the bearish sentiment stays unchanged as this candle can only be viewed as sellers probably taking a pause after the recent losses. We think the downside swing would likely continue as long as the index fails to recoup the losses from 23 May’s long black candle. As the index is trading below the falling 21-day SMA line, this implies a still-bearish sentiment outlook.

As seen in the chart, the immediate resistance level is seen at 27,673 pts, determined from the high of 23 May’s long black candle. The next resistance would likely be at 28,317 pts, which was the high of 17 May. Towards the downside, the immediate support level is seen at 27,068 pts, ie the low of 27 May. The next support is maintained at 26,835 pts, obtained from the previous low of 22 Jan.

Recall that 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 27,673-pt threshold. This is in order to lock in a larger part of the profits.

Source: RHB Securities Research - 29 May 2019