Stay long, with a stop-loss set below the 25,983-pt support. The E-mini Dow ended lower to form a black candle last night. It declined 62 pts to close at 26,940 pts, off its high of 27,017 pts and low of 26,890 pts. However, it is not surprising that there are profit-taking activities after the recent gains. The index is still holding above the 21-day SMA line, indicating that the upside momentum is not diminished yet. Moreover, as the 14-day RSI indicator is now recovering to a more positive reading at 56.01 pts, the bullish sentiment has improved. Overall, we keep our bullish view on the E-mini Dow’s outlook.

As seen in the chart, the immediate support level is seen at 26,750 pts, which was 15 Oct’s low. The next support is maintained at 25,983 pts, determined from the low of 10 Oct’s “Hammer” pattern. On the other hand, we anticipate the immediate resistance level at the 27,397-pt record high. If a decisive breakout arises, the next resistance is situated at the 28,000-pt psychological spot.

Hence, we advise traders to maintain long positions, following our call of initiating long above the 26,750-pt level on 16 Oct. A stop-loss is preferably set below the 25,983-pt threshold to limit the risk per trade.

Source: RHB Securities Research - 17 Oct 2019