Market sentiment remains bearish; Stay short. After posting two black candles in a row, the E-mini Dow ended higher to form a positive candle yesterday. It rose 81 pts to close at 25,190 pts, off its high of 25,218 pts and low of 25,057 pts. Yesterday’s positive candle should merely be viewed as a technical rebound following recent losses. Given that the index has continued to stay below the declining 21-day SMA line, this implies that the bearish sentiment is still intact. Overall, we believe that the downside swing – which started from 1 May’s “Bearish Engulfing” pattern – may carry on.

As shown in the chart, the immediate resistance level is seen at the 26,000-pt round figure, ie near the high of 9 May. If a breakout arises, the next resistance is anticipated at 26,691 pts, which was the high of 1 May’s “Bearish Engulfing” pattern. Towards the downside, the immediate support level is maintained at 24,862 pts, obtained from the previous low of 8 Feb. Meanwhile, the next support would likely be at the 24,000-pt psychological mark.

Thus, we advise traders to stay short, since we previously recommended initiating short below the 26,000-pt level on 10 May. 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 - 31 May 2019