Stay short, with a new trailing-stop set above the 28,550-pt level. Selling momentum in the E-mini Dow continued as expected. A “Long Black Day” candlestick was formed last Friday, which pointed towards a continuation of the downside move. It plunged 595 pts to close at 28,196 pts. On a technical basis, market sentiment is likely to remains bearish in the coming sessions. This is as the E-mini Dow has erased the previous week’s gains and hit a 3-week low. Overall, we keep our bearish view on the index’s outlook.

According to the daily chart, the immediate resistance level is now seen at 28,550 pts, set near the midpoint of 31 Jan’s “Long Black Day” candle. The next resistance is anticipated at 28,881pts, ie the high of 31 Jan. On the other hand, we are eyeing the immediate support level at 28,084 pts, determined from the low of 8 Jan. If a breakdown arises, the next support is situated at 27,726 pts, ie the previous low of 10 Dec 2019.

To re-cap, on 30 Jan, we initially recommended traders to initiate short positions below the 28,780-pt level. We continue to advise them to stay short for now, while setting a new trailing-stop above the 28,550-pt threshold. This is in order to lock in part of the profits.

Source: RHB Securities Research - 3 Feb 2020