Maintain short positions. The E-mini Dow ended lower to form a black candle last night. It lost 251 pts to close at 25,369 pts, off the session’s high of 25,717 pts and low of 25,330 pts. From a technical perspective, we expect the downside swing that started from 1 May’s “Bearish Engulfing” pattern to likely continue. This is because the Emini Dow has stayed below the declining 21-day SMA line and erased the previous day’s gains, implying that the market sentiment is bearish. Overall, we expect the market to decline further if the immediate 25,213-pt support is taken out decisively in the coming sessions.

As seen in the chart, the immediate resistance level is seen at the 26,000-pt round figure, situated near the high of 9 May as well. If a breakout occurs, 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 would likely be at the 25,000-pt psychological mark.

Hence, 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. In the meantime, a trailing-stop can be set above the 26,000-pt threshold as well in order to limit the risk per trade.

Source: RHB Securities Research - 29 May 2019