Initiate short positions below the 28,300-pt level. The HSIF formed a “Long Black Day” candle yesterday, indicating that the selling momentum could be strong. It plunged 794 pts to close at 27,901 pts. Technically, the index has breached below the 10-day SMA line and hit its 3-week low, implying that the sentiment has turned negative. This can also be viewed as a continuation of the sellers extending the downside swing from 20 Jan’s “Bearish Engulfing” pattern. Yesterday’s closing also triggered our previous trailing-stop recommendation at the 28,659-pt threshold – which has captured part of the profit – since we initially advised traders to initiate long above the 26,500-pt level on 12 Dec 2019.

As seen in the chart, the immediate resistance level is seen at 28,300 pts, which is set near the midpoint of 21 Jan’s “Long Black Day” candle. The next resistance is anticipated at 28,755 pts, ie 21 Jan’s high. Towards the downside, we are eyeing the near-term support level at 27,447 pts, which was defined from the low of 16 Dec 2019. This is followed by the 27,000-pt psychological mark.

Hence, we advise traders to initiate short positions below the 28,300-pt level. A stop-loss can be set above the 28,755-pt threshold to limit the risk per trade.

Source: RHB Securities Research - 22 Jan 2020