Stay short while setting a trailing-stop above the 26,625-pt resistance. The downside move in the HSIF has continued as expected, as a black candle was formed yesterday. It dropped to a low of 26,291 pts during the intraday session, before ending at 26,416 pts for the day. Market sentiment remains bearish, as the HSIF has marked a lower close below the declining 21-day SMA line. Moreover, the 14-day RSI indicator deteriorated to a weaker reading at 45.94 pts – this indicates that the downside swing that started off 26 Nov’s “Shooting Star” pattern may carry on. Overall, we maintain our bearish view for the HSIF’s outlook.

Judging from the current outlook, we anticipate the immediate resistance level at 26,625 pts, set near the midpoint of 29 Nov’s long black candle. If a decisive breakout arises, look to 27,267 pts – which was the high of 26 Nov’s “Shooting Star” pattern – as the next resistance. To the downside, the immediate support level is maintained at 25,949 pts, obtained from 4 Dec’s low. Meanwhile, the next support is seen at 25,507 pts, ie 10 Oct’s low.

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 26,625-pt level in order to limit the risk per trade.

Source: RHB Securities Research - 11 Dec 2019