Stay long while setting a trailing-stop below the 27,989-pt support. The HSIF formed a long white candle last Friday. It gained 394 pts to close at 28,821 pts, off the session’s low of 28,393 pts. Market sentiment remains bullish, as the index has posted a long white candle and hit its 2-week high. This may also further extend the rebound that started with 13 Jun’s “Hammer” pattern. In view that the 21-day SMA line is likely to turn higher, the bullish sentiment has therefore been enhanced.

According to the daily chart, we maintain the immediate support level at 27,989 pts, which was the low of 26 Jun. The next support would likely be at 26,702 pts, ie the low of 13 Jun’s “Hammer” pattern. On the other hand, the immediate resistance level is seen at 29,080 pts, obtained from 4 Jul’s high. The next resistance is anticipated at the 30,000-pt psychological mark, set near the high of 6 May’s long black candle as well.

Hence, we advise traders to maintain long positions, 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 in order to lock in part of the gains.

Source: RHB Securities Research - 22 Jul 2019