Maintain long positions. After the market rose for four consecutive sessions, the HSIF ended lower to post a long black candle yesterday. During the intraday session, it dropped to a low of 27,106 pts before ending at 27,122 pts for the day. However, the appearance of yesterday’s long black candle can be viewed as a result of profit-taking activities following recent gains. Technically speaking, the positive sentiment remains unchanged. This is as long as the index does not erase the gains from 5-11 Jun’s positive candles. Overall, we think that the rebound – which started from the recent low of 4 Jun – may persist.

As shown in the chart, we now anticipate the near-term support at the 27,000-pt psychological mark. This is followed by 26,505 pts, determined from the recent low of 4 Jun. Towards the upside, the immediate resistance is seen at 27,770 pts, ie the high of 12 Jun. Meanwhile, the next resistance is maintained at 28,317 pts, situated at the previous high of 17 May.

Therefore, we advise traders to stay long, following our recommendation to initiate long above the 27,436-pt level on 12 Jun. A stop-loss is preferably set below the 26,505-pt threshold in order to limit downside risk.

Source: RHB Securities Research - 13 Jun 2019