Stay short, with a new trailing-stop set above the 27,450-pt level. The HSIF formed another black candle last Friday. It was for the third consecutive session, which implies that the bearish sentiment remains intact. The index dropped to a low of 26,703 pts during the intraday session, before ending at 26,717 pts for the day. On a technical basis, the downside momentum is likely to continue, as the index has taken out the previously-indicated 27,068-pt and 26,835-pt supports – also sending the index to its lowest point in more than four months. Overall, we maintain our bearish view on the HSIF’s outlook.

Currently, the immediate resistance level is seen at 27,450 pts, set near the highs of 28-29 May. The next resistance is maintained at 28,317 pts, which was the high of 17 May. On the other hand, we now anticipate the near-term support level at 26,164 pts, ie the previous low of 14 Jan. This is followed by the 26,000-pt psychological mark.

Recall that on 7 May, we initially recommended traders to initiate short positions below the 29,400-pt level. We continue to suggest them to stay short for now, while setting a new trailing-stop above the 27,450-pt mark. This is in order to lock in a larger part of the profits.

Source: RHB Securities Research - 3 Jun 2019