Bearish sentiment remains unchanged; stay short. The HSIF ended higher to form a positive candle yesterday. It settled at 26,021 pts, after hovering between a high of 26,246 pts and low of 25,595 pts throughout the session. Still, the appearance of 6-8 Aug’s candles indicate that sellers may be taking a pause following the losses seen lately. Again, as the index failed to recoup losses from 5 Aug’s long black candle, this implies that the bearish sentiment stays intact. Overall, we believe that the downside swing – which started from 4 Jul’s “Shooting Star” pattern – may continue.

As shown in the chart, we are eyeing the immediate resistance at 26,880 pts, which was the high of 5 Aug’s long black candle. The next resistance is maintained at 28,000 pts, ie near 26 Jun’s low. To the downside, we anticipate the immediate support at 25,219 pts, determined from the low of 6 Aug. Meanwhile, the next support would likely be at 24,876 pts, ie the previous low of 3 Jan.

Hence, we advise traders to stay short, given that we initially recommended initiating short below the 28,109-pt level on 1 Aug. A trailing-stop can be set above the 26,880-pt level in order to secure part of the profits.

Source: RHB Securities Research - 9 Aug 2019