Maintain short positions. The E-mini Dow formed another white candle last Friday. It gained 345 pts to close at 26,525 pts, off its low of 26,060 pts. Unsurprisingly, 3-4 Oct’s white candles should be viewed as a result of the technical rebound that followed the recent plunge. We believe the bears may continue to control the market, as long as the index does not recoup the losses created by 2 Oct’s “Long Black Day” candle. Overall, we keep our bearish view on the E-mini Dow’s outlook.

Based on the daily chart, the immediate resistance is seen at 26,617 pts, ie the high of 2 Oct’s “Long Black Day” candle. If a breakout arises, look to 27,040 pts – which was near the highs of 23 Sep, 26 Sep, and 1 Oct – as the next resistance. On the other hand, we now anticipate the immediate support at 25,703 pts – this was determined from the low of 3 Oct. The next support is maintained at 25,266 pts, or the previous low of 26 Aug.

Therefore, we advise traders to maintain short positions, following our recommendation of initiating short below the 26,780-pt level on 2 Oct. In the meantime, a trailing-stop can be set above the 26,617-pt threshold to limit the risk per trade.

Source: RHB Securities Research - 7 Oct 2019