Stay short while setting a trailing-stop above the 26,880-pt resistance. The HSIF formed a “Doji” candle yesterday. It closed at 25,943 pts, off its high of 26,085 pts and low of 25,634 pts. Market sentiment remains bearish as the index has continued to stay below the declining 21-day SMA line. From a technical perspective, as long as the HSIF does not recoup losses from 5 Aug’s long black candle, there is a possibility that the downside move would persist. Overall, we remain bearish on the HSIF’s outlook.

Based on the daily chart, the immediate resistance is seen at 26,880 pts, ie the high of 5 Aug’s long black candle. The next resistance is anticipated at 28,000 pts, situated near 26 Jun’s low. Towards the downside, the immediate support is maintained at 25,219 pts, obtained from 6 Aug’s low. The next support is maintained at 24,876 pts, which was the previous low of 3 Jan.

Therefore, we advise traders to maintain short positions, following our recommendation to initiate short below the 28,109-pt level on 1 Aug. In the meantime, a trailing-stop can be set above the 26,880-pt threshold in order to lock in part of the gains.

Source: RHB Securities Research - 8 Aug 2019