Stay short while setting a trailing-stop above the 27,267-pt resistance. Following the long black candle that was formed on 29 Nov, the HSIF ended higher to form a white candle yesterday. It closed at 26,488 pts after oscillating between a high of 26,576 pts and low of 26,337 pts. Still, the appearance of yesterday’s white candle indicates that the market may be experiencing a technical rebound after the losses seen in the previous session. As the index is still trading below the 21-day SMA line, this implies that the bearish sentiment stays intact. Overall, we believe the downside swing – which began with 26 Nov’s “Shooting Star” pattern – may continue.

As seen in the chart, the immediate resistance level is seen at 26,625 pts – this was situated near the midpoint of 29 Nov’s long black candle. The next resistance is anticipated at 27,267 pts, ie the high of 26 Nov’s “Shooting Star” pattern. Towards the downside, we are eyeing the near-term support level at 26,178 pts, which was defined from 14 Nov’s low. This is followed by 25,507 pts, or the previous low of 10 Oct.

Hence, we advise traders to stay short, following our recommendation of initiating short below the 26,630-pt level on 22 Nov. A trailing-stop can be set above the 27,267-pt mark to minimise the risk per trade.

Source: RHB Securities Research - 3 Dec 2019