Stay long, provided the 27,989-pt support is not violated at the close. The HSIF formed another black candle yesterday. It closed at 28,103 pts, off its high of 28,444 pts and low of 28,091 pts. Despite this lower close, the index failed to break below the 27,989-pt support mentioned previously. This signals that the positive sentiment stays intact. On a technical basis, as the HSIF continues to stay above the rising 21-day SMA line, this suggests the upside swing from 13 Jun’s “Hammer” pattern remains valid. Overall, we keep our bullish view on the index’s outlook.

As seen in the chart, we anticipate the immediate support at 27,989 pts, which was the low of 26 Jun. The next support will likely be at 26,702 pts, ie the low of 13 Jun’s “Hammer” pattern. Towards the upside, the immediate resistance is seen at 29,080 pts, which was obtained from 4 Jul’s high. If a decisive breakout arises, the next resistance is situated at the 30,000-pt psychological mark, ie near the high of 6 May’s long black candle as well.

Hence, we advise traders to stay long, in line with our initial recommendation to have long positions above the 27,436-pt level on 12 Jun. A trailing-stop can be set below the 27,989-pt mark to secure part of the gains.

Source: RHB Securities Research - 10 Jul 2019