Stay long while setting a stop loss below the 25,983-pt support. The E-mini Dow ended lower to form a black candle last night. It slipped 34 pts to close at 26,763 pts, off its high of 26,904 pts and low of 26,715 pts. However, the positive sentiment stays intact. This is as yesterday’s black candle can be viewed as buyers probably taking a breather after the recent gains. Given that the E-mini Dow is still holding above the 21-day SMA line and the previously indicated 25,983-pt support, this implies that the rebound which began from 10 Oct’s “Hammer” pattern may carry on. Overall, we stay upbeat in our outlook.

As seen in the chart, we are eyeing the immediate support level at 26,496 pts, ie the low of 11 Oct. If this level is taken out, the next support is maintained at 25,983 pts, which was the low of 10 Oct’s “Hammer” pattern. To the upside, we anticipate the immediate resistance level at 27,088 pts, ie 17 Oct’s high. Meanwhile, the next resistance would likely be at the 27,397-pt record high.

Hence, we advise traders to stay long, following our recommendation of initiating long above the 26,750-pt level on 16 Oct. A stop-loss can be set below the 25,983-pt threshold in order to minimise the downside risk.

Source: RHB Securities Research - 23 Oct 2019