Stay short. The HSIF formed a “Doji” candle yesterday. It settled at 26,516 pts after hovering between a high of 26,664 pts and low of 26,425 pts throughout the day. Technically, we think the bearish sentiment stays unchanged, as the index failed to close above the previously-indicated 26,625-pt resistance. Given that the HSIF is still trading below the declining 21-day SMA line, this indicates that the index’s outlook remains negative. Overall, we think the downside swing that began with 26 Nov’s “Shooting Star” pattern may continue.

Based on the daily chart, the immediate resistance level is anticipated at 26,625 pts – this is situated near the midpoint of 29 Nov’s long black candle. The next resistance will likely be at 27,267 pts, ie the high of 26 Nov’s “Shooting Star” pattern. On the other hand, we anticipate the immediate support level at 25,949 pts, which was the low of 4 Dec. If a breakdown arises, look to 25,507 pts – the previous low of 10 Oct – as the next support.

Consequently, we advise traders to stay short, in line with our initial recommendation to have short positions below the 26,630-pt level on 22 Nov. A trailing-stop set above the 26,625-pt mark is advisable to minimise the risk per trade.

Source: RHB Securities Research - 10 Dec 2019