Stay short while setting a new trailing-stop above the 26,617-pt level. The selling pressure in the E-mini Dow continued as expected. Another “Long Black Day” candle was formed last night, which pointed towards a continuation of the downside move. It plunged 536 pts to close at 25,985 pts. From a technical perspective, the downside swing that started from 13 Sep’s “Shooting Star” pattern would likely persist. This is as the E-mini Dow erased the previous month’s gains and marked a lower close below the 21-day SMA line. Overall, we keep our bearish view on the E-mini Dow’s outlook.

As seen in the chart, we are now eyeing the immediate resistance level at 26,617 pts, set at the high of 2 Oct’s “Long Black Day” candle. The next resistance is maintained at 27,040 pts, determined near the highs of 23 Sep, 26 Sep, and 1 Oct. Towards the downside, the immediate support level is seen at 25,977 pts, which was 3 Sep’s low. If a decisive breakdown arises, look to 25,266 pts – ie the previous low of 26 Aug – as the next support.

Hence, we advise traders to stay short, in line with our initial recommendation to have short positions below the 26,780-pt level on 2 Oct. For now, a new trailing-stop is advisable to set above the 26,617-pt threshold in order to minimise the risk per trade.

Source: RHB Securities Research - 3 Oct 2019