Maintain short positions. Yesterday, the HSIF’s downward momentum continued as expected after it formed another black candle. During the intraday session, it declined to a low of 25,163 pts before ending at 25,211 pts for the day. Based on the current technical landscape, the downside move is likely to continue, as the HSIF has posted a third consecutive black candle and hit its 7-month low. Moreover, as the index has taken out the 25,219- pt support mentioned previously, this is an indication that the bearish sentiment should remain intact.

As seen in the chart, the immediate resistance level is seen at 26,500 pts, set near the midpoint of 5 Aug’s long black candle. If the price climbs above this level, the next resistance is anticipated at 27,660 pts, defined from the high of 2 Aug. On the other hand, we are now eyeing the near-term support level at the 25,000-pt psychological spot. This is followed by 24,876 pts, ie the previous low of 3 Jan.

Therefore, we advise traders to stay short, in line with our initial recommendation to have short positions below the 28,109-pt level on 1 Aug. A trailing-stop can be set above the 26,500-pt threshold in order to secure part of the gains.

Source: RHB Securities Research - 14 Aug 2019