Stay short while setting a trailing-stop above the 27,673-pt resistance. The HSIF’s selling momentum continued as expected. A black candle formed yesterday, which pointed towards a continuation of the downside move. During the intraday session, the index dropped to a low of 27,139 pts before ending at 27,228 pts for the day. On a technical basis, investor sentiment remains bearish, as the HSIF marked a lower close below the declining 21-day SMA line. Overall, we expect the market to decline further if the immediate 27,068-pt support is taken out decisively in the coming sessions.

As shown in the chart, we anticipate the immediate resistance at 27,673 pts, ie the high of 23 May’s long black candle. The next resistance is seen at 28,317 pts, which was defined from the high of 17 May. On the other hand, we maintain the immediate support at 27,068 pts, ie the low of 27 May. If this level is taken out, the next support is seen at 26,835 pts, or the previous low of 22 Jan.

As a result, we advise traders to stay short, since we originally recommended initiating short below the 29,400-pt level on 7 May. A trailing-stop can be set above the 27,673-pt mark to lock in a larger part of the gains.

Source: RHB Securities Research - 30 May 2019