Stay short. Last Friday, the HSIF formed a black candle with a long lower shadow. It dropped to a low of 26,230 pts during the intraday session, before ending at 26,233 pts for the day. We note that the index has formed a second consecutive black candle below the falling 10-day SMA line, which signals that the bearish sentiment continues to stay intact. The long upper shadow shows that there was buying momentum during the day before the market pushed it down by the end of the trading session – indicating that the sellers are still in control of the market.

Presently, we are eyeing the immediate resistance level at the 26,500-pt round figure. The next resistance is seen at 26,760 pts, ie 31 Jan’s high. Towards the downside, the near-term support level is now seen at the 25,949 pts, ie the low of 4 Dec 2019. This is followed by 25,507 pts, which was the previous low of 10 Oct 2019.

Hence, we advise traders to stay short, in line with our initial recommendation to have short positions below the 28,300-pt level on 22 Jan. For now, a new trailing-stop set above the 26,760-pt threshold is advisable in order to lock in a larger part of the gains.

Source: RHB Securities Research - 3 Feb 2020