Maintain short positions. The downward movement of the HSIF has continued as expected, as a black candle was formed yesterday. It closed at 27,099 pts, after oscillating between a high of 27,319 pts and low of 27,042 pts. Presently, market sentiment remains bearish, as the aforementioned black candle was the second one recorded in two consecutive days. This movement may further extend the downside swing that started with 15 Apr’s “Shooting Star” pattern. Overall, the bearish outlook should remain intact.

According to the daily chart, the immediate resistance is maintained 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, ie the high of 17 May. Towards the downside, the immediate support is seen at 27,068 pts, which was the low of 27 May. If a decisive breakdown arises, the next support is anticipated at 26,835 pts, ie the previous low of 22 Jan.

Thus, 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. In the meantime, a trailing-stop can be set above the 27,673-pt threshold in order to secure part of the profits.

Source: RHB Securities Research - 31 May 2019