Stay short provided that the 26,206-pt resistance is not violated at the closing. The HSIF formed a white candle yesterday. It closed at 26,191 pts, off the session’s low of 25,535 pts. However, we maintain our bearish sentiment, as the index failed to close above the 26,206-pt resistance mentioned since a week ago. As losses from 9 Aug’s black candle have not been recouped, and the 21-day SMA line is still pointing downwards, this shows that the downside momentum is not diminished yet. Overall, we remain bearish on the HSIF’s outlook.

According to the daily chart, the immediate resistance level is seen at 26,206 pts, defined from the high of 9 Aug. The next resistance would likely be at 27,660 pts, obtained from the high of 2 Aug. On the other hand, the immediate support level is anticipated at 24,791 pts, which was the low of 15 Aug. If this level is taken out, look to 24,457 pts – ie the previous low of 29 Oct 2018 – as the next support.

Hence, we advise traders to maintain short positions, since we initially recommended initiating short below the 28,109-pt level on 1 Aug. A trailing-stop is advisable to set above the 26,206-pt threshold in order to secure part of the gains.

Source: RHB Securities Research - 20 Aug 2019