Stay short. The HSIF formed a “Doji” candle yesterday. It closed at 26,848 pts, off its high of 26,879 pts and low of 26,671 pts. Still, the downward momentum is not over thus far, as the index continues to stay below the declining 21-day SMA line. On a technical basis, as long as the HSIF does not climb above the 27,450-pt resistance mentioned previously, there is a possibility that the downside swing would keep going. In view that the 21-day SMA line is now likely to turn lower, the bearish sentiment has therefore been enhanced.

As seen in the chart, the immediate resistance level is seen at 27,450 pts, which was near the highs of 28-29 May. If a breakout arises, look to 28,317 pts – ie the previous high of 17 May – as the next resistance. On the other hand, the immediate support level is anticipated at 26,505 pts, ie the low of 4 Jun. Meanwhile, the next support is maintained at 26,164 pts, determined from the previous low of 14 Jan.

Therefore, we advise traders to stay short, following our recommendation of initiating short below the 29,400-pt level on 7 May. A trailing-stop is advisable to set above the 27,450-pt threshold in order to lock in part of the profits.

Source: RHB Securities Research - 7 Jun 2019