Downside move likely to continue; stay short. The HSIF formed a black candle last Friday. It closed at 25,787 pts after oscillating between a high of 26,175 pts and low of 25,566 pts. Based on the current technical landscape, we think the sellers may have retrained control of the market. This was because last Friday’s black candle has erased most of the previous three sessions’ losses. Given that the index is still trading below the 21-day SMA line, this implies that the downside swing, which started from 16 Sep’s black candle, may carry on. Overall, we remain negative on the HSIF’s outlook.

As seen in the chart, we are eyeing the immediate resistance level at 26,318 pts, ie the high of 25 Sep. The next resistance will likely be at 26,831 pts, which is set at the high of 19 Sep’s black candle. To the downside, the immediate support is seen at 25,313 pts, or the low of 3 Sep. If a breakdown arises, the next support is maintained at 24,791 pts, which was defined from the previous low of 15 Aug.

Hence, we advise traders to stay short, in line with our initial recommendation to have short positions below the 26,318-pt level on 2 Oct. A stop-loss can be set above the 26,831-pt mark to minimise the risk per trade.

Source: RHB Securities Research - 7 Oct 2019